How military couples can get interest rate reliefJoint credit card accounts qualify under the Servicemembers Civil Relief ActBy Todd Ossenfort
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
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
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to The Credit Guy.
Published: April 12, 2010
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