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Old 10-24-2012, 11:40 AM   #61
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Investment advice and options are the only aspect of USAA with which I've been unimpressed. As I was graduating college I spoke with one of their advisers and she told me to split my savings between the Capital Growth (with an expense ratio of 1.34%) and Cornerstone Strategy (1.31%, now called Cornerstone Moderately Aggressive) funds. Really? I put my money into the S&P 500 fund instead. Then I moved to Vanguard when I saw that they offered more index funds for half the cost or less.

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A couple of you (NavyDavey? Others?) have mentioned USAA's career-starter loan to ROTC midshipmen/cadets. I'm trying to learn more about this program, and I'd appreciate whatever you can tell me about your recent (this millennium) experience. My college daughter might be interested in doing a little interest-rate arbitrage.
The career starter loan is what brought me to USAA. In 2008 the terms for ROTC grads were $25,000 for 60 months at 1.99% if your paycheck went direct deposit to your USAA checking account. There was some other incentive to have the payments automatically drafted from your checking account. At the time, of course, you could buy a CD for 4-5% and turn a guaranteed profit. Some people did. Today, not so much. Most of us used it for some combination of buying a car, funding a Roth IRA, and providing some liquidity before our paychecks started rolling in. I paid off my loan early when I realized that I had lots of cash sitting around earning much less than 1.99%.

Tim
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Old 10-25-2012, 09:51 PM   #62
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USAA's homeowner's insurance is boilerplate- it's only set up for primary residences.

If you move out of your home and rent it out (or buy an investment property), USAA insists on insuring you for the 'actual replacement value'.

This is great protection if you are insuring your primary residence.

However, if you are insuring a rental property, you may only wish to insure it for your purchase price.

Hypothetical Example: You own an investment property out of state that you bought for $131K.

Option (1) USAA will insure you, but they insist of insuring you for an assessed replacement/rebuild value of $189K, and that you MUST rebuild the investment property if it gets destroyed. If the home gets destroyed, you've just bought yourself a one-way plane ticket to go babysit a major construction project out-of-state.

Option (2) Other insurance companies will insure the investment property for a dollar value you assign. In this case, you insure the $131k purchase for $141k ($10k added to cover the cost to have the site bulldozed slick and cap off the utilities). You've got your $131K investment back, you're made whole, and you can re-deploy the cash to purchase another investment property (or some other investment if you choose) the next week. You do not have to take time away from your j*b to go and manage a major construction project 3 time zones away.

...would be nice to see USAA adjust their homeowner's insurance model to allow option 2.

Note: In the very hypothetical example above, the property owner chose USAA anyhow b/c their premium was much less than the Option 2 insurance vendor.
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Old 10-27-2012, 03:53 PM   #63
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Thanks, everyone, keep 'em coming.

Every few days I've been e-mailing your comments (and feedback from the blog and other discussion boards) to the USAA PR staff. (You stay anonymous.) USAA's PR people farm it out to the USAA execs who will be briefing us so that we can expect them to be ready for interrogation. Like a good nuke, I keep a tickler list and I query their progress. The other nukes at USAA really appreciate reliving the good ol' days.

Let me share the general response to most comments. These are my words, not USAA's, but they paraphrase what I get from conversations & e-mails:

USAA prefers to spend the vast majority of their operating profits on core member services. They give some back through the subscriber savings account and they have to fund their insurance reserves (to the extent required by law) but, like Vanguard, they do not have to make a profit for their shareholders.

This means they'll spend money to streamline business processes like the call center or check deposits or insurance claims. They'll spend millions on advertising to a certain demographic if they expect those new members to be at least as well-behaved as the existing members. I've been told that there were running gun battles spirited debates at USAA HQ for months over whether to form a partnership with NASCAR or the NFL. So far NFL is paying off big-time.

They've also licensed their USAA credit cards to dozens of veteran's organizations for more customer affinity dollars-- primarily to generate cash for the capex to comply with greater regulatory oversight on credit cards.

That member service philosophy extends to the majority, not the minority. USAA has been steadily chipping away at the rewards features of its credit cards & debit cards because of higher regulatory compliance expenses. Their other option would've been to get rid of debit cards entirely, but the majority of their members want the service even if it has less reward. USAA has also not implemented business checking because (in their opinion) only a minority of members want it. We bloggers have the opinion of "build it and they will come", so the dialogue continues. USAA is beginning to comprehend that they are seriously pissing off thousands of small-business entrepreneurs who are also military spouses (and very vocal on social media) so I expect that this will eventually be implemented with a monthly fee.

USAA's member-service philosophy also extends convenience only until it bumps into security (and liability). For example the comment about being able to temporarily change ATM features can be implemented, but the Security Center knows that it can also be hacked. USAA's #1 source of website activity originates in the People's Republic of China-- USAA does not have any customers in that country. USAA burned themselves badly in the 1990s on a computer system that was overdesigned and underpowered, and they ended up writing off millions of dollars. Today they have to make a business case for security (liability) before they'll even start analyzing the software/hardware requirements.

I've almost always found USAA's property insurance to be more expensive [EDIT: "than Armed Forces Insurance"], and I think it's because USAA knows what it costs to send out adjustors and process claims. The other companies are chasing market share by cutting premiums below costs, and the only time we pay the consequences is after the hurricane when customer service is overwhelmed-- it takes a month for the adjustor to show up (let alone cut a check). Personally we've always insured our properties with Armed Forces Insurance. We carry extremely high deductibles in the hope that we never need customer service or have to process a claim. However I think AFI is operating on the brink of undercapitalization and would have a hard time handling a major hurricane in an expensive area like Hawaii. We can handle the risk and we're saving the thousands of dollars of annual premiums.

We've gone with USAA auto insurance under the same "whoever's cheapest" concept because we don't carry collision or comprehensive. We've been fortunate to get great member service, but I hardly ever use it.

USAA's investments CFPs will never be able to compete with Vanguard or even Fidelity. Their staff spends a lot of time & effort on hand-holding and managed accounts, and they're just trying to beat out the Edward Jones & Ameriprises. They're pretty much running that business at cost, and they're not taking soft-dollar arrangements from the other fund companies.

SamClem, that's a good comment on Wells Fargo. I'm a Berkshire shareholder but I'm aware that WF is not exactly praised for their customer service, and I'll see if USAA will take on the member-service aspect of that problem. USAA must be saving a ton of money by outsourcing to WF, but I can't wait until WF tries to foreclose on a deployed Reservist because the bank doesn't understand the rules...
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Old 10-27-2012, 05:27 PM   #64
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Thanks for presenting USAA's side of things.

I'm surprised that you find the property insurance to be expensive. Our renter's insurance seems to be priced very well. I got quotes from Liberty Mutual a few weeks ago after learning about an alumni association discount, and their price for both renter's and auto insurance was much higher than what we pay at USAA.

What have they done to "chip away" at credit card reward features? Their World Mastercard is our primary card, and I've been happy with it. At the end of the year it works out to ~1% cash back for us without any hassle.

Tim
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Old 10-27-2012, 07:35 PM   #65
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Originally Posted by timwalsh300 View Post
I'm surprised that you find the property insurance to be expensive. Our renter's insurance seems to be priced very well. I got quotes from Liberty Mutual a few weeks ago after learning about an alumni association discount, and their price for both renter's and auto insurance was much higher than what we pay at USAA.
Good point-- my editing window was still open so I clarified that to "more expensive than Armed Forces Insurance".

USAA was heavily invested in Hawaii when Iniki rolled through here in 1992. At one point (1998?) they stopped insuring Hawaii homes unless you were a first-time home buyer. Last time I checked their rates (2011) they were quoting nearly $5000/year vs AFI's $900. But again that's USAA's exceptional customer service, whereas I'm paying for rock-bottom customer service because we're willing to self-insure for a lot of the damage & repair delays. If I could get a $50K deductible and a 25% hurricane deductible then I'd take it.

I've never seen any companies beat USAA's vehicle insurance.

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What have they done to "chip away" at credit card reward features? Their World Mastercard is our primary card, and I've been happy with it. At the end of the year it works out to ~1% cash back for us without any hassle.
The big fuss last year was USAA canceling the rewards program on the debit card, which I believe was 2%. USAA used to give huge discounts on gas (like 5%) for their Mastercard, but it's been years since I've seen that.

I've been happy with their USAA Mastercard too, but it's my backup card. My primary is an Fidelity Rewards Amex that returns 2% on everywhere it can be used (mainly Costco). Of course I use the USAA card when I'm overseas and when I'm renting a car, so the Amex isn't always the best choice.
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Old 11-13-2012, 02:44 PM   #66
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Hi Nords, I just read your blog and can confirm that USAA has refunded my CC foreign transaction fees since at least the 10th of November! I didn't even have to call them. They evidently used my address on file to apply the benefit. It also looks like USAA's exchange rate is better than PenFed's. As a test I bought the exact same item with my USAA CC and my PenFed CC in Spain within a few minutes of each other in Europe a few days ago. As of 3 days later, the USAA charge is U$S 4.97 and PenFed is U$S 5.01. Looks like USAA is back to being my go-to CC again! Thanks, Pajaro
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Old 11-13-2012, 06:32 PM   #67
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Hi Nords, I just read your blog and can confirm that USAA has refunded my CC foreign transaction fees since at least the 10th of November! I didn't even have to call them.
You're welcome!

We flew home yesterday (boy are my arms tired) and I have a lot to catch up on. But USAA started reimbursing the fee last month. Here's the first of several blog posts with answers to some of the questions:
USAA blogger conference: initial report
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Old 04-30-2013, 01:39 PM   #68
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I just found out that the USAA benefit to refund the foreign transaction charge is good for only 12 months per PCS, regardless of the PCS length. Since they back dated my benefit to begin on my arrival date, it has now expired. I will begin using my PenFed credit card tomorrow. It was nice while it lasted!
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