Authorized user not covered by service member's APR protections

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My husband has a credit card with an $8,000 balance. I am an authorized user. I am about to deploy and am curious if SCRA will cover reducing the interest rate to 6 percent while I'm on active duty. Thank you.  -- Ashley


Dear Ashley,
Under the Servicemembers Civil Relief Act (SCRA), it's true that you can ask creditors to reduce your interest rate on most pre-service debt to no more than 6 percent while you are in active military service. The reduced rate stays at 6 percent until you leave active military service. (Some creditors voluntarily reduce the rate to an even lower rate for service members.) After you leave active service, your rate may go back to previous levels, but creditors must not back charge you for higher interest during the time you were active.

This benefit is not automatic. You must tell your creditors in writing that you are being deployed, and that your active duty status affects your ability to meet your obligations. Creditors must comply, unless they can show that your deployment does not affect your ability to pay; for example, if your employer is paying you the difference between active duty pay and your regular wages.

It's best to send a notice as soon as you receive your orders. Otherwise, you have until 180 days after your termination or release from active duty to notify your creditors. They will reduce your interest charges retroactively for the time you were in service.

Many SCRA and other military benefits apply equally to service members and their spouses. However, that is not the case with this benefit, according to the Servicemembers Civil Relief Act of 2003 Comptroller's Handbook.

The SCRA applies to pre-service debt that you, as the service member, are legally obligated to repay. If you are only an authorized user, you are not liable for the debt so you are not covered by that benefit. If you and your husband owned the debt jointly, regardless of which one of you originally had the debt, you would be able to have the rate reduced to 6 percent while you are deployed. When surveyed the seven biggest card issuers in 2013, just three offered joint accounts. We might expect more service members to get caught in this technicality as a result.

Surprisingly, you could even have the rate reduced if you had joint debt with anyone else, regardless of your relationship.

The SCRA offers many hardship relief provisions while you are on active military duty, even if reduction of the interest rate on this credit card is not one of them. Under the SCRA, you and your family have certain protections against cancellation of life insurance, foreclosure or eviction, and repossession of vehicles and other possessions while deployed. It's important to know exactly what your rights are under the SCRA, so you can protect yourself while you are serving our country.

See related: Law caps service members' rates on old debt, not new

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Updated: 04-24-2019