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How military couples can get interest rate relief

Joint credit card accounts qualify under the Servicemembers Civil Relief Act

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the CreditCards.com expert

Dear Credit Guy,
I was reading your article about notifying credit card companies for active duty to lower interest rates to 6 percent. My husband (he's deploying soon) plans on doing this with his credit cards. We were planning on adding each other to our cards also. If I add him to mine, would the act cover those cards even though the credit was originally issued to me, a civilian? Since we both are married, and I have power of attorney, wouldn't the card be his, too, once his name is added? Thank you for any response. -- Jennifer

Answer for the CreditCards.com expert

Dear Jennifer,
You are referring to the Servicemembers Civil Relief Act of 2003 (SCRA), which provides that the maximum rate of interest charged on debts incurred before military service must be 6 percent and any interest in excess of 6 percent be forgiven. Under this provision of the act, accounts of the service member or joint accounts of the service member and the service member's spouse are eligible.

To qualify for the interest rate of 6 percent, you must submit in writing to the issuing financial institution notice that you qualify for the reduction and a copy of the military orders calling the service member to military service. I would mail it certified mail, return receipt requested. Once the creditor receives your paperwork, the account will accrue interest at the 6 percent rate from the date of military service. You will also need to send paperwork again once your husband is no longer serving. You have until 180 days after his release to let them know.

I understand your reasoning for wanting your credit cards to be included under the protections of the SCRA. However, just adding your husband's name to your credit card account as an authorized user still leaves the account only in your name. As such, it would not be eligible for protection under the SCRA because the account is not a joint account with your husband.

You could request that your husband be added as a joint cardholder, but most card issuers will require that your husband fill out an application, which would result in the issuer reviewing his credit report to decide whether to add him as a financially responsible party on your account.

If time allows, you might consider transferring the balances from your credit card accounts to your husband's accounts. Or apply for a new joint credit card and transfer the balances from your cards to the new jointly held card. Also, the interest rate reduction is for obligations and liabilities incurred before military service. The interest rate reduction will not apply to any new debt acquired after military service has begun.

One other thing to keep in mind: The SCRA provides for creditor protections. A court can give the creditor relief from the interest rate reduction provision if the creditor can prove that the service member's ability to pay interest in excess of 6 percent is not affected by the service member's military service.

Take care of your credit!

See related: Active military personnel protected from interest rate hikes, Stepping up for America's military men and women

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Published: April 12, 2010


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