I came across an interesting article in The Atlantic entitled, "In the Era of Greed, Meet America's Good Bank: USAA", and I couldn't agree more. You see, I used to do business with each of the Too Big To Fail banks, until I wrote my plan. I had sizable accounts open at B of A, Citi, Chase, and Wells Fargo. It took me almost a year, but I eventually transferred everything to USAA and closed all my accounts with the TBTF banks.
I can already hear the howls of protest when you realize that I'm tangentially comparing a retail banking operation to investment banking, but bear with me. Even die hard TARP-dependent Wall Streeters can recognize a well-run, highly profitable business model.
While other financial and insurance companies flirted with collapse, USAA's net worth grew from $14.6 billion in 2008 to $19.3 billion in 2011. And it has continued lending money while other banks have tightened their loan operations despite billions in government funding to encourage liquidity. It has a free checking account, has been at the forefront of electronic banking, and reimburses up to $15 in other banks' ATM fees. Its credit rates are 43 percent lower than the national average.
Now, the catch is that you have to be a current or former member of the military, which makes USAA's client base solidly middle class. On top of that, the bank is not publicly traded and is structured more like a credit union than a commercial bank. But it works. Most former military guys I know bank there, and many have their homes and cars financed and insured through USAA as well.
I wonder if it's a model that would work in the broader market. USAA takes a fairly conservative approach to lending, since it is members' money which is being lent out. The bank is also on the leading edge of technology, offering mobile phone apps and electronic deposits of checks with either a scanner or a smartphone. The combination of aggressive investment in technology and conservative investment in lending make USAA a force to be reckoned with.
So I'm left to wonder: if you're still banking with a TBTF bank, why? I'm serious, I'd like to know. Are you just too lazy to find a smaller regional bank? Or do you travel quite a bit and need global access to ATMs, etc? Or do you just not think about it?
I still believe that the best way to ensure that we as taxpayers don't end up footing another TARP bill is to steadily draw down deposits in the TBTF banks. Unfortunately, many of the bad actors who caused the economic crisis are still firmly in power at the TBTF banks. The government doesn't have the stomach to let nature take its course, so we're left with ft/wp/2003/wp03226.pdf">depositor discipline as our only recourse.
Unless you have a very good reason to do business with a TBTF bank, you should find a bank that's going to take better care of you and actually values your business. And if you're a vet, that bank is USAA.
I bank with Chase. Combination of a few things: 1. Laziness. 2. Easy access to ATM's in the city 3-6. Laziness
Growing up I did all my banking with a local credit union, and actually really liked the bank but it was just too inconvenient to maintain once I moved. I should really switch to an online checking account that reimburses ATM fees and am open to suggestions. I have heard Schwab checking is good. Would consider the Fidelity Cash Management account since I have my brokerage account there anyways.
I have Schwab and Fidelity accounts. The Fidelity Cash Management takes forever for funds to be available when you transfer them in. The Schwab Checking account is very quick with availability turnaround and anytime I deposit my checks through my phone they are immediately available once accepted. The acceptance has taken up to about 24 hours.
USAA is tits. No ATM fees ever (Including those 10 dollar fees at strip clubs), fast, reliable service, just all around awesome.
I love calling the USAA folks on the phone, you normally get someone on the phone that is located in Minnesota or Texas. Before I joined the Navy I used BofA, never actually managed to get someone on the phone, normally just got bounced around by a switchboard computer.
The difference between USAA and a traditional bank is that USAA is a inter-insurance exchange, which means that the members (who are or were military officers) cross insure each other and provide the capital needed to finance the banking arms reserves. The full members are treated like shareholders and receive a dividend each year, and the associate members (all non-officer members) receive a rebate based on insurance premiums and bank fees paid. There is a formula that decides the size of your dividend and it is based on the amount of business you have conducted over your entire period of full membership.
It is model based on the old pre-Glass-Steagall repeal bank, wherein firms made a profit based on the spread between the interest paid on deposits and the interest charged on loans. However, USAA does not have an aim to maximize the return to shareholders, their goal is to maximize the level of service provided to members, so they don't really have a cost of capital in the traditional sense.
These guys are not a small fry, they have somewhere between 8-9 million members.
My dad was in the national guard for a little while during Vietnam so our entire family has USAA. People that have it are mildly obsessed with it and now I see why. The service is incredible, the reps are great and know what they're talking about. My dad pushed me off onto my own policy a year ago so now my kids will be able to have it which puts a smile on my face.
Also, aside from actually having served in the armed forces I believe one of your parents has to have actually used USAA at some point in order to be eligible.
Yep, my mother married a Vietnam vet in 2006. I now have their car insurance, which isn't anything special but I now have my foot in the door. Bwahahaaahah.
how about opening a US$ Bank account with a Canadian Bank?
Cool: military folk showing the business 'elite' how it's done. There are plenty of companies that are very conservatively managed and return portions of the proceeds to the customers: NJM insurance comes to mind. It just seems like the "smash and grab" followed by "people power" cycle got out of control for a while?
UFO, good call on New Jersey Manufacturers. They are one of the most conservative insurance companies I can think of, but at the same time when you get into a car accident, they will be the one company least likely to cause a major hassle in the state of New Jersey. Then again, they are the hardest insurance to get in New Jersey for a reason. NJM insurance is pretty much a godsend for coverage.
Eddie, I'm with Bank of America. The only reason why I'm with Bank of America is because I was a legacy Summit Bancorp/Fleet Bank client. My check book still says Summit Bancorp on the checks and I haven't found a bank I like. We have a whole slew of publicly traded bank (BCB, Chase, Sovereign, Capital One, PNC, BoA, Citibank, Valley National Bank) and maybe one or two small banks (Provident is the only one that comes to mind). Honestly, the banks just all suck. It's kinda the truth... and while Provident is a good alternative, it does not have any branches near my parents, so that means I'm forced to make sure I hit the ATM where I am before I go anywhere.
Highly recommend USAA. All my ATM fees are covered and I don't have to go to a ATM or branch to deposit checks - just snap a picture with my phone and it's in my account that day.
Just FYI for non-military individuals: https://www.usaa.com/inet/pages/why_choose_usaa_main
"USAA's investment products, most checking and savings products, credit cards, life insurance, and shopping and discounts are available to other [non-military] individuals.
USAA auto and property insurance is not available due to membership eligibility requirements. New Hampshire and North Carolina residents who are not eligible for membership may be able to obtain USAA auto insurance by calling 1-800-531-USAA (8722) to determine eligibility as defined by these state's mandatory coverage laws."
I have USAA auto insurance through my dad (ex-Navy). It's great, and like VT said I now have my foot in the door.
Thinking of switching my bank account there as well (from BofA).
I have been using my local bank from back in Illinois since I was 16. I am too lazy to change checking accounts. Too much work.
-No fee checking. -ATM fees get reimbursed -No interest, but the alternative is what- 0.9% at Ally.com? -Personal attention from local yokels some of whom I knew from high school. People know me by name and ask me about my work at
They take very good care of me. Why would I ever want to leave?
IP - because you need a local bank for some reason? Otherwise I'm totally with you. I honestly wish Summit Bancorp wasn't bought up because they were the best bank I could ever expect and they were all over NJ. Fleet Bank comes in at a close second. After Fleet was absorbed by Bank of America, it just went down hill.
I actually ended up with Chase after a series of mergers. I started out with BankOne and they were great.
I use Schwab for my banking needs and ING for my savings account.
I would suggest both.
Schwab refunds 100% of ALL ATM fees, has check deposit through your Iphone, always has an American on the other line who is very friendly and helpful, and free checks / cards / no fees of any kind.
ING allows me to open like 50 separate savings accounts so I can have 1 for 'emergency fund' 1 for 'car' or 'wedding' or whatever. Also they have a decent savings account rate. And again, no fees.
hmmmm, my dad was a Marine... gonna have to see if he has done business with this USAA
I was trying to withdraw a large sum of money I had in WFC savings (may be the reason) and had to jump through several hoops to get my cash. I appreciate their concern for security, though. The teller started asking me for a pin for a separate checking account I had and if I had the debit card, which I don't have nor do I use and I didn't know the pin because they never sent me the follow-up letter to set-up the pin after they cancelled my previous card for unknown reasons. I was asked which bank debit I normally use (TD) and said they charged fees (they don't). They also hid their withdrawal slips and only had deposit slips out. Haven't had any problems with TD.
Someone needs direct deposit
Mr. Hansen,
How much were you looking to withdraw? Was it in excess of 10,000? If it was, then it's no wonder they didn't make it easy to withdraw the funds. There are certain dollar values that cause an instant trigger for heightened security. It first trips at 10,000 I believe - and has to do with OFAC and FinServ reporting rules. My question is why didn't you just cut a check to yourself in the full amount of the account and deposit it accordingly at the other institution? Or did you just need cash?
Yes its $5,000 cash we( I work in retail banking) have to fill out some bullshit then at $10,000 we have to fill out other bullshit and ask for all kinds of forms of ID.
Totally unrelated to the topic, but Mr. Hansen just reminded me of a great gag if you have an affinity for random acts of chaos.
Next time you're inside the bank making a deposit or withdrawal, take a blank deposit slip, turn it over on the back and write, "This is a robbery. Stay calm and fill an envelope with the cash from your drawer. I have a gun." Then put that deposit slip back into the middle of the pile of blank deposit slips and go on about your business.
Somebody is gonna have a pretty exciting experience at that bank a few days later.
...wear gloves, they can lift prints off of paper :/
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