If you or a family member serves in the military, there’s a good chance you are familiar with USAA, the financial services company offering everything from auto insurance to bank accounts. They offer a number of different credit cards. In this review we will take a look at the pros and cons associated with them.
Part 1: Cash-Back Credit Cards
Due to its flexibility, many people seem to prefer cash back, so let’s start with the USAA credit card offers for this category. Unfortunately their cash back program has a major drawback…
As you can see from the above table, you start out by earning less than 0.5 percent cash back. Only yearly spending above $10,000 will be earning 1 percent or more (and the amount below never will). Most other mainstream cards offer at least 1 percent back on all purchases.
Because of this tricky tier system, you might be better off with a more straight-forward cash back card such as these:
All of the cards from USAA that offer cash rewards use the aforementioned tiered system:
- USAA Cash Rewards MasterCard or Visa
- USAA Cash Rewards American Express
While the benefits differ slightly between them, their rewards all operate the same way:
- You earn “up to” 1.25 percent cash back on all purchases, without any cap on the amount that can be earned (the AmEx version also earns double cash back at gas stations and grocery stores).
- In January the account will be credited with all the cash back earned over the past 12 months. Therefore you only get your cash rebate once per year.
- Neither version has an annual fee.
The other drawback is that they don’t offer any higher reward categories. Depending on your spending patterns, you may want to compare these 5 percent cash rebate credit card offers.
The APRs on all of USAA’s offers can be low if you have good credit. When it comes to benefits, the American Express version offers purchase protection, extended warranty and other perks for no additional cost (as you would find on any American Express card). The World MasterCard version also offers similar benefits but in my opinion, they aren’t as good.
Verdict? The USAA cash back credit card program is not very attractive with this tiered rewards structure. These days you should expect at least 1 percent on all your spending, if not more. Therefore, the application only makes sense if it is the other benefits you are after instead.
Part 2: Cards With Reward Points
The majority of the USAA credit cards are for programs that offer reward points. These don’t have an annual fee either:
- USAA Rewards (World MasterCard or American Express)
- USAA Military affiliate credit cards (available for 16 different military associations such as Air Force Association, Veterans of Foreign Wars, Wounded Warrior Project and others)
- USAA Active Military MasterCard with rewards
All of these credit cards operate on the same points program. Here’s how it works:
- You earn 1 point per dollar spent. The cards have no bonus categories, with the exception of the AmEx which gives double points on gas and groceries.
- No cap to the number of points that can be earned
- Points can be redeem for cash back, as well as the other usual options credit cards offer these days: merchandise, gift cards, travel, charitable donations
How much are the points worth? Well that depends on how you redeem them.
If you do it at lower tiers you usually won’t get a good deal in terms of point value.
The table on the right shows the cash rebate option and as you can see, it takes 20,000 points to get the full 1 cent value per point. If you go below that, your value per point goes down. If you use your points for charitable donations it’s the same $200 threshold for maximum value.
The worst value comes with the merchandise and gift certificate/card rewards. Based on the tiers shown in the fine print, it appears you will never get a full penny per point. For example, it shows a $25 gift card costing 3,500 points (about 7/10th of a cent per point). Even the highest tier shown, a $500 gift card, costs 70,000 points (also around the same conversion).
The best value appears to be when points are used for cruise rewards. It’s possible to get about 1.18 cents per point, but the drawback is you need to redeem hundreds of dollars worth to get that big of a boost. Airline rewards do not give a boost in value but are still a good deal, because you get 1 cent per point with as little as 15,000 points ($150 worth) redeemed.
Perhaps the most noteworthy benefits come with the USAA Active Military MasterCard. If you are deployed you get to enjoy three major perks (a) special interest rate for up to 12 months, (b) new finance charges during deployment will be rebated, and (c) no foreign transaction fees on purchases made outside of the country.
Verdict? If rewards are what you’re after, these cards aren’t the best deal out there. There are credit cards with higher travel rewards on the market. However, if you want the other USAA credit card benefits then one of theirs might still make sense.
Part 3: Low rates and credit building
The USAA Rate Advantage MasterCard – Offers a low rate with qualifying credit as low as 6.9 percent and no annual fee. Those considered less creditworthy may still be stuck with a rate as high as the 20s though, according to the fine print on the application. This card offers no rewards.
USAA Secured Credit Card – This is for folks who can’t qualify for a regular credit card, but still want a card to build their credit with. The USAA secured card charges a $35 annual fee which is definitely reasonable. You can learn more about how secured credit cards work here.
Verdict? Neither of these cards come with rewards, but that’s okay, because if you carry a balance or are trying to rebuild credit, rewards should be the last thing on your mind. If you have great credit and can get the lowest tier APR on the USAA Rate Advantage card, then it’s a deal. The secured credit card from USAA is also a good value for what it offers.
This review was written or last updated April 3, 2014