I have to confess, I am biased because I worked at USAA for six months while waiting to start school again. At the time I started working there, I was banking with one of their major banking competitors (Bank of America Military Bank - formerly Fort Sam Bank) because my dad had been an employee there for many years. I was ready for a change due to BOA's increasing imposition of fees. The two companies have very different philosophies: as a corporation, BOA must balance the needs of its customers with shareholder demands. As an association, USAA can focus solely on the needs of its members.

Who should bank at USAA:

Members of the armed forces. During my time at USAA, I actually got to sit in on an executive meeting. USAA execs are very concerned about the welfare of their target market, as many executives are veterans themselves. Policies they've instituted, such as making it very difficult to bounce a check (a big military no-no) reflect this. By the way, you can bank with USAA if you are not in the military or related to someone who is. You just can't get insurance with USAA.

People who are looking for abundant free services, especially ATM rebates, funds transfer, and overdraft protection. You may visit other banks' ATMs up to 10 times a month without a fee (they rebate the other bank's charge, up to $1.50 each time). You can also transfer funds to and from any other bank in the country, for free. Overdraft protection is also offered - money is sucked right out of my USAA savings account when I bounce a check, with no fee. You can choose other types of accounts to "protect" your checking account as well. The overdraft protection feature is offered on your account application, you can't miss it.

Everything this bank does makes it convenient to bank from a distance, another reason why it's great for members of the military - you don't have to switch your bank when you move. If you do feel you need to open an account at a local bank, but enjoy USAA's service, you can always take advantage of the free funds transfer system. While it's not as fast as wiring money (it takes about 2 days), it's free. To deposit checks, you use bank by mail envelopes; they're also free and postage paid. If you need to speak to a representative, they have a toll-free number.

One more word about the funds transfer system: Money is deducted from your account instantaneously when you execute a funds transfer away from USAA, even though the money won't show up in the other bank's account for 1-2 days. However, USAA consistently applies their policy when the reverse is true. Money is instantly added to your account when you use USAA's system to transfer funds from another bank to USAA, even though they won't get the money for 1-2 days. Amazing how fairly USAA treats its members!

If you are a USAA member (meaning you have property & casualty insurance there), it makes sense to bank at the bank you "own". As I understand it, any profits from the bank belong to the association, and ultimately come back to you in dividends.

If you're the type of person who relies heavily on customer service representatives, you'll be happy with USAA. Customer service is great; I've never had to wait on hold. Representatives I've spoken with have always been polite and knowledgeable. I have used email for two inquiries, and received a response within hours both times.

Who shouldn't bank there:

People who absolutely need a brick and mortar building (unless you live in San Antonio) to do their banking. Also, I've heard that it's a little more difficult to get credit at USAA than other places, due to a stricter, more conservative lending style. However, they do make exceptions for college students, and big generous exceptions, especially in terms of very low car loan interest rates for soon-to-be and newly commissioned military officers.

If you like to let a lot of cash sit around earning interest, USAA's savings rates are better than a lot of other banks, but are not the best available. You may wish to use another bank to stash your cash and then use the funds transfer system when you need access to your money.

Online services:

Their website isn't the best-looking out there, but it's easy to use and gets the job done (view balances & transactions, check rates, transfer funds) which is all I really care about. As for looks, the layout has been gradually improving since they rolled out their online services. I can't really rate their web bill payment service, since I don't use it. The only thing I can say about it is that the price has come down to $4.95; it used to be $7 or $8. If you mail a lot of bills, it might be worth it, although there are internet banks that do not charge for this service.

Update 4/7/00:

USAA FSB has recently been rated Highest in Satisfaction with Initial Consumer Automobile Loans by J.D. Power & Associates for 1999. That's ahead of every other bank and manufacturer lending (i.e. dealer financing) organization in the nation!

Recommended: Yes