Switching to GEICO Auto Insurance Saved Me 24%

THIS IS NOT A PAID POST.  I’VE RECEIVED NO COMPENSATION FROM GEICO.

We’re all familiar with GEICO’s slogan of “15 minutes can save you 15% or more.”  In my case, GEICO saved me 24% by switching to GEICO from USAA.  I’ve been a fan of USAA for a long time, but over the past 5 years I’ve personally noticed a significant drop in customer service.  Here’s my story of how and why I switched my auto insurance to GEICO.

I’m currently stationed in Louisiana (LA), which has one of the highest auto insurance rates that I’ve experienced.  LA rates are even higher than the California coast, which was my previous duty station.  LA does offer a 25% (well, not exactly 25%) discount for military members.  I completed my form in January of 2014 and in November of 2017, I found out you have to complete the form every time you renew your policy.  So in my case this is seven 6-month policy renewals where I missed out on the “25%” discount—costing me over $400.  Here are some problems with this process:

• According to 2 customer service representatives, by LA law, they are not allowed to remind military members about the discount
• Your policy renewal is sent through your message and nowhere in it does it say “Action”
• The military discount sheet is on PAGE 10 of a multi-page document instead of upfront so you know you must take action
• According to the 2 customer service reps, by LA law, they can’t retroactively pay you back for missed discounts. After talking to multiple military members, this may be untrue, as other LA military members have been back paid.
• The 25% discount is not a true discount. It only applies to vehicles registered in LA, so in my case it was only going to be a 12% discount. I imagine a lot of military members have cars registered in multiple states.
• Not all USAA agents can answer LA insurance questions, so the online chat can’t help you, nor can the initial representative help you. You will be transferred; you will have to be on hold.

A coworker overheard the troubles I was having and recommended switching to GEICO.  I was with GEICO 17 years ago and they did not offer competitive prices.  At the time, USAA was 75% cheaper than GEICO when I was young and enlisted.  This week, I called GEICO and ran through three different scenarios.

1. I could keep my USAA Auto and Property insurance (status quo).  To keep an apples-to-apples comparison with GEICO, I added the Auto and Home combination discount of $11 ($132 divided by 12 months) that I get for my property insurance, to my current auto insurance policy adjusting my monthly payment to $220.  I have a 17-year old son which is why my payment is so high.  Start budgeting now if you’re approaching teenage years.
2. I could switch to GEICO Auto and keep my USAA Property insurance.  To maintain the equal comparison, I added USAA’s Auto and Property insurance discount of $11 to my GEICO quote and my adjusted monthly auto payment would be $167—though the actual payment will only be $157.
3. I could switch to GEICO Auto and GEICO Property insurance.  GEICO was unable to match USAA’s $1,100 worth of annual discounts and savings, theoretically adding an additional $92 to the reduced monthly cost of $147, giving an adjusted cost of $239 a month.  The reason why I added the increased insurance premium to my auto insurance is because I needed a way to compare switching auto insurance policies alone by keeping all things equal.  In economics, we use the Latin phrase Ceretis Parubis, which means “all other things being equal.”

As you can see, by comparing the adjusted costs between the status quo of $220 a month and switching just my auto insurance to GEICO at $167, I could save nearly $53—a 24% savings.  It’s sad to leave a company after 17 years, but GEICO has nearly the same customer service satisfaction rate as USAA and after this week’s dealings with both companies, I can say that GEICO may exceed USAA’s customer service—at least in the insurance division.  Check it out yourself to see if 15 minutes can save you 15% or more.

USAA Limitless Rewards Card - 2.5% Cash Back REVIEW!

Actual Review - Not a Paid Post

After running in a pilot program, the USAA Limitless Reward card is available to USAA members with direct deposit to a USAA account (of at least $1,000). I was able to sign up for the program in the pilot phase because Louisiana was one of the four test states. The states available keeps increasing, so call USAA and see if your state is available. The card has no annual fee and offers 2.5% cash back on all purchases. It's been 60 days and the card works as advertised.

Prior to this card, I had a MasterCard through the Air Force Morale, Welfare, and Recreation (MWR) fund. There was an $11 monthly fee, and 2% cash back on all purchases on a military installation and 1% on all other purchases. Personally, I believe the military (especially the Air Force) has lost its emphasis on MWR programs, so by switching credit cards, I saved the $11 monthly fee and I don’t feel too guilty. Additionally, we did very little shopping on base, so on average I was only getting 1.1% back on all purchases-- approx. $30 a month, less the $11 monthly fee; only $19 in monthly rewards total.

Since the USAA Limitless Reward card has no fee and offers 2.5% on all purchases, I've been able to increase my monthly rewards to approx. $80. I maximized it by placing all purchases and bills on my rewards card too.

Many cards offer a 5% cash back on different purchases like gas, restaurants, groceries and then rotating commodities, and then 1% on everything else. 5%/1% sounds better, but it typically doesn't offer the same return as a flat-rate on all purchases program. 2.5% is one of the highest rewards plan that I've seen and it's limitless. Also, many credit cards offer other rewards instead of cash back. I've never been a fan of using credit card rewards for anything other than cash back. Typically, you're paying 1-for-1 the cost of the commodity (airlines, Amazon gift cards, etc.) so it's technically the same as cash back. Also, it's encouraging you to spend money by pigeon holing you into one option.

Other-than cash-back rewards are great when the cost of the commodities are cheaper by using the rewards. For example, when you can buy $100 worth of airline rewards for only $75 worth of "cash value" rewards; or a $25 Amazon gift certificate for only $20 of "cash value" rewards. The disadvantage is typically that you can only use these types of cards for airline rewards or a specific company's gift cards.

Another thing I like about USAA accounts is when I pay off the credit card every payday from my checking’s account, it brings my balance to zero and the payment is taken out of my checking’s immediately. With previous credit cards outside of USAA, the payment would take one or two days before both transactions were displayed.

BL: 60 days in and I highly recommend the USAA Limitless Rewards card. I recommend you check your current credit card, calculate what your monthly reward rate is (less the annual fee if you have one), and see if it beats USAA's 2.5% cash back amount. If not, then I recommend you switch to the USAA Limitless Rewards card.

USAA Index Funds (USSPX & USPRX)

This March, LeBron James asked Warren Buffett for investing advice. Mr. Buffett simply told him to keep 10% in cash and 90% of his money in an S&P 500 Index Fund (http://www.cnbc.com/id/102467435). This is becoming the common advice from most professional money managers now. As a whole, individual investors are unable to beat the market and often pay more fees to brokerages trying. Hedge and Private Equity Funds, which are sometimes able to beat the market, are often outside the reach of individual investors. To make the most of your money, Index Funds offer the greatest exposure to American (domestic) stocks; diversify for the lowest overall risk; and often have the least amount of fees.

Military members often choose to bank with USAA because of its exceptional customer service and understanding of the military lifestyle. Personally, I use Fidelity for my brokerage for my IRA and taxable accounts but there have been times when some of the uniqueness of my military career has made transactions difficult. Thanks to fully online services, my military service hasn’t interfered with much of my banking needs. But if you do like to bank with USAA, then USAA offers two S&P 500 Index Funds.

1. USSPX – S&P 500 Index Fund Member Shares with a minimum investment of $3K. The expense ratio is ~.26% which is really low (a good thing) compared to the category’s average of .59%. The Fund has a 4-star Overall Morningstar Rating which is good and has a 7.78% 10-year average return.
2. USPRX – S&P 500 Index Fun Reward Shares with a minimum investment of $100K. The expense ratio is ~.16% which is lower than the Member Shares Index Fund because it’s a larger amount of money being spread across the mutual funds and reduces overall transactions for the fund manager. The fund also has a 4-star Overall Morningstar Rating and has a 7.9% 10-year average return which is only slighter higher than the Member Shares fund probably because of the lower expense ratio. If you have $100K to put into one investment then you probably don’t need the advice of this blog (joking).

Index funds are a great way to invest in the stock market without having to make individual stock and mutual fund selections. An S&P 500 Index Fund is still exposed to stock market risk so if the stock market sinks so will the Index Fund. If the market does sink, regular monthly investments, you will be buying more of the fund at lower stock prices. Another risk is the S&P 500 invests in the Top 500 American companies so you may not be exposed to international growth from emerging markets. The Index Fund is ~98% in stocks so as you get older you may be exposed too much stock. LifeCycle Funds often provide better protection as you get older so having a LifeCycle Fund and an Index Fund is the ideal investment strategy.

 

Military Financial Report Video #2 - USAA Mutual Funds

Check out the second video in my YouTube series.  In this short YouTube clip, I take you through a quick tour of USAA's mutual funds and how to find which one is right for you.  Please let me know if you would like a YouTube video on a specific topic.  Also, if you like the videos, please remember to Subscribe, Comment and Like the videos.

USAA Mover's Advantage Program Review Part 4: Closing, Moving In and My Recommendation

Read Part 1 here: Part 1: First Contact
Read Part 2 here: Part 2: Update
Read Part 3 here: Part 3: The Offer and The Loan


To recap so far, we initially used USAA's Mover's Advantage Program and were considering a USAA Mortgage.  After some initial communication hiccups with the Mover's Program we were assigned a USAA-sponsored realtor and we put an offer down on a house.  After going through the logistics of me coming back from Korea and taking leave before traveling to my new assignment and several unresolved communication problems, we decided not to go with a USAA Mortgage and chose a local mortgage company.


On December 16th, we closed on the house using a local notary, a service the local mortgage company offered and USAA did not.  One of the problems I had was with trying to communicate the whole process over e-mail.  I asked the mortgage company if a personal check for the down payment and final closing costs would suffice and they said yes, but really meant that a wire transfer or cashier's check would have to be used.  I used USAA's wire transfer service but had to pay a $20 wire transfer fee.


After leave and a week in TLF (Temporary Lodging Facility) waiting for our household goods to be delivered, we finally moved in.  All in all, it was a much smoother process than I thought.  There are quite a bit of expenses that are normal to moving and purchasing a new house.  Here are some that you should consider.

• 1 year of homeowner's insurance due at closing
• VA Funding Fee due at closing (based on amount of loan)
• Closing Costs (ours was paid by our seller)
• Utility set up costs

In summary, I RECOMMEND USAA's Mover's Advantage Program so they can assign you a realtor that deals with the uniqueness of military moves and at this time I do NOT RECOMMEND USAA's Mortgage's company for people with unique military moves.  I'm disappointed that a bank that deals almost solely with military members is not set up to handle unique military moves like mine with me being stationed in Korea and my wife doing the house hunting.  The initial communication and customer service problems were inconsistent with other USAA products and services.

USAA Mover's Advantage Program Review Part 3: The Offer and The Loan

Read Part 1 here: Part 1: First Contact
Read Part 2 here: Part 2: Update

As I mentioned in Part 2, Louisiana has complicated school zoning laws so my wife had to go there two months before and try to find a house so we can close before we arrive.  Louisiana was going to allow us to use the Temporary Lodging Facility zip code but that placed our kids in undesirable schools.  We had to find the schools we wanted then find which housing communities are in that zone and then refine our search.

Our USAA-sponsored realtor had his site populated with houses in those zones, in our price range with the requirements we wanted so we had a good idea of what we wanted to see.  My wife flew in and saw a couple of houses that night.  The next day she saw more houses, and using Skype, we discussed her top three houses.  To her surprise, I picked one of the more pricier houses on her list and was her #1 choice.  The reason why I chose that is because all of the houses were comparable in meeting our requirements, but the more expensive one was actually a better value. 

The value of comparable houses is expressed in cost per square foot.  This house was only $125 a square foot versus $133 and $136 for the other two in her top three.  Based off asking prices, the average for the Barksdale AFB area was $135.  So I was getting this house for $10 a square foot cheaper; or a 7% discount to the area average.  Our realtor told us he would calculate all the prices of our top three and see what kind of flexibility we had.  The next day my wife told our realtor that we selected the more expensive one and he told us that the house's, we picked, price was just lowered so we didn't have any price flexibility.  But since the owners were trying to move out quickly, our offer was the asking price minus closing costs and to keep the hot tub (our realtor's idea, not ours...lol).  Our offer was accepted!

A surprise to us, our USAA-sponsored realtor actually recommended that we at least consider a local mortgage company versus going with the USAA-mortgage company.  I was already concerned with USAA's mortgage company's communication and response (read more about that in Part 1, link above) so we got the information from a local mortgage company.  They were very friendly and gave us an Itemized fee worksheet for each loan at each percentage rate.  USAA Mortgage company didn't offer any of that visibility/transparency.  I used that itemized worksheet and called USAA to go over each fee.  Since I was using my Veteran's Affairs loan, there was little difference in the fees, but the advantage was that the local mortgage company was able to work with the logistics of us not being in Louisiana during closing.  USAA's mortgage company did not offer that service.  We would have to close by mail and could significantly extend the closing price if we went through USAA.  We chose the local mortgage company.

So far, these were the costs that I've incurred while purchasing a house:

• $50 for the USAA pre-approval (they were going to charge another $300 if I chose to go with them).  I will have to call them and tell them we are going with a different mortgage company, so that $50 may be lost.
• $1,000 for my wife to fly out, rent a car and stay in a hotel to find the house and put an offer on it
• $1,200 for the escrow deposit
• $350 for the home inspection.  The buyer pays this cost to ensure that the seller doesn't purchase a shady inspector
• $400 for an appraisal fee but this check won't get cashed unless we (the buyers) back out of the deal

I look forward to hearing other stories of purchasing homes using any other method specific to military members.  

USAA Mover's Advantage Review Part 2: Update and Pre-approval Increase

To read my first review go here: Part 1: First Contact.

After the troubles with the first contact, I was referred to a realtor.  Since then, house hunting has been going great.  We gave the realtor our wish list and he updated his website which automatically gives us houses to look at in the areas we are searching for and in the price range we indicated.

Due to the uniqueness of Louisiana's school zoning laws, my wife is going to travel to Barksdale two months prior for a couple of days and look at homes; and possibly put an offer on one we like.  The zoning laws complicated our search because we must be living in a zip code to attend the schools that we want.  The school system will allow us to use Barksdale's Temporary Lodging Facility's (TLF) zip code but the respective schools aren't ranked well.  So we are going to try and get an established zip code before we get there so our kids can go to the higher rated schools.  Louisiana's public schools aren't rated that well and as you get further from certain locations, it gets really bad really fast.

In Part 1: First Contact, we initially set up a pre-approval and then I called to get it increased before my wife gets there.  I just called the mortgage center and it only took about 10 minutes and the representative was really nice.  Things will move quickly once we put an offer down on a house and as promised, I will keep this blog updated.

If you have any experiences using USAA's Mover's Advantage Program please leave a comment.

USAA Mover's Advantage Review Part 1 - First Contact

In June of 2013, I found out that I was going to be stationed at Barksdale AFB, LA.  After 14 years in the military, I decided it was time to buy my first house.  I did some research and wanted to try USAA's Mover's Advantage program to purchase a house.  This is the first of many posts about the whole process so people can learn from my process.

The first thing I learned was that USAA offers up to $3,100 in cash bonus for buying or selling a home in certain states.  One of the states that you can't get that bonus is Louisiana, so that was disappointing.  I still pressed and applied to be entered in the program on the USAA website.  At the time of applying, I am/was stationed at Kunsan AB, Korea so in the comments section I put that my primary means of communication is my e-mail.  For some reason that request was ignored, because it's most likely an automated process.  They called my wife's phone number and sent correspondence my mail to my home address in California.  I was disappointed in this because USAA is usually well equipped to handle these type of situations where the primary means of contact is e-mail.

I decided to call them directly and talked to a nice representative and explained my situation.  She said she would update my primary means of contact to e-mail and then transferred me to the mortgage section.  Again, I was disappointed because I still get charged for 1-800 numbers from the Korean service I have.  But, the USAA is customer service was still far superior to any other bank I've ever dealt with.  After about 10-20 mins of questions, and after pulling me and my wife's credit report, I was pre-approved.  I chose to go with the VA loan pre-application.  Here were some considerations that the mortgage representative brought up:

• There is a VA Fee of 2.2% of the home loan (you can put it on your loan)
• As of August 2013, the VA was 1/8th of a percentage better and less likely to impacted if interest rates were too rise before January
• There is a $50 pre-approval fee that you have to pay upfront to USAA but they can automatically take it from your USAA Checkings and/or Credit Card
• Once you find the house you like, then you will have to pay another $300 for a conversion fee from pre-approval to actual approval
• I approved for the VAs' no down payment loan and there is no Premium Mortgage Insurance

I'll be interested in my readers' experiences.  Please share them by leaving a comment.

USAA Career Starter Program

Have you heard about USAA's Career Starter loan?  It is a "signature" loan (meaning no collateral down) for officers about to graduate from a commissioning program.  The max amount of the loan is $30K and the interest rates range from .5% - 2.99% and payments are deferred for 6 months after your commissioning date.  A common question is, "Is the USAA commissioning loan a good idea?"  As always, there are two sides to a personal finance decision: the economical and the emotional.  Here are my thoughts:

This USAA Career Starter Loan is an excellent economic decision.  It's the lowest interest rate you can find on a signature loan.  When comparing a loan versus cash decision, you must use the "Rate of Return" to help guide you.  One of the smartest things you can do is to pay down any debt you currently have; i.e. other student loans, credit card debt or a car loan.  Most consumer debt ranges from 5-25%, so consolidating them into a .5-2.99% loan could save hundreds and/or thousands of dollars.  Another option is to only use enough to purchase a car which would cut the interest payment in half of what a normal car loan would have been.  Another option would be to invest in something that earns more than 2.99%.  Either way, this "cheap source of money" could be utilized very effectively.

The other side to a personal finance decision is the emotional side and the one I used to make my own decision.  I graduated Officer Training School in 2009 and in 2009 I had been debt free for 5 years and wanted to keep it like that.  I love the feeling of being debt free and it is worth more to me than some small percentages of return if I had chosen to invest it.  If I lost money investing it, I would have increased my losses because I would still owe that money back plus interest; albeit, a low interest rate.  Another emotional factor comes from those who know they can't handle debt.  If you are living paycheck to paycheck, then adding more debt, regardless of the interest rate is not a smart move.  You must know your self and your own debt/risk profile.

Does USAA Have Good Mutual Funds?

USAA has done a great job in improving it's mutual fund choices and performance.  On 30 Jun and according to their site, USAA has seven 5-star rated mutual funds and eighteen 4-star rated mutual funds.  From a quick glance, it looks like most of their highest-rated funds are from their bond family of mutual funds and might be doing well because bonds have been doing well, but there are some non-bond mutual funds on the list too worth checking out.  If you like USAA's solid customer service and appreciation for the military and want to invest with them, I would start looking at these mutual funds first.

https://www.usaa.com/inet/imco_mutualfund/ImMorningstarFunds

Morningstar 5 Star USAA Mutual Funds

A list of five star Morningstar rated USAA mutual funds.

https://www.usaa.com/inet/imco_mutualfund/ImMorningstarFunds?ACTION=INIT