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Debt Management

Credit guide for military members and their families

Many military families have access to exclusive card rates and perks

Summary

While federal laws give baseline protection, many credit card issuers go beyond the minimum and offer a range of benefits for servicemembers and their families.

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If you’re a member of the military, you could save hundreds of dollars a year on credit card interest payments or fees – or be refunded thousands of dollars in old payments – just by contacting your card company and letting them know you’re serving your country.

Federal laws offer key protections, and many credit card issuers go beyond those baselines and offer a wide range of money-saving benefits that are exclusively available to military families. But the breaks do not come automatically; the onus is on servicemembers to apply. And because these perks aren’t widely advertised, many service members don’t know about the benefits available.

“Our focus lies elsewhere,” says Richard Kerr, a nine-year veteran naval officer and editor at The Points Guy. “Worrying about the ancillary benefits of a credit card versus an upcoming deployment is pretty low on the list.”

As a result, servicemembers could be forfeiting hundreds, or potentially even thousands, of dollars in credit card interest and fees simply because they aren’t taking full advantage of the offers and benefits available to military personnel.

Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (SCRA) requires lenders to cap interest rate charges at 6 percent for already-existing loans that you took out before starting active duty, including credit cards, vehicle loans, mortgages, home equity loans and student loans. Creditors must completely forgive any interest above 6 percent during the time you qualify for SCRA benefits. They cannot defer it.

“This is a huge benefit that so many military families just don’t know about,” says Christine Maxwell, an Army wife and author of the military finance blog Her Money Moves. “And it can literally save them tens of thousands of dollars over a military career.”

To receive these lowered interest rates, you have to provide creditors with “written notice and a copy of your military orders or ‘other appropriate indicator of military service,'” according to the Department of Justice. This must be done within 180 days of the time your service ends.

This benefit can especially help servicemembers who have credit card debt or other high-interest loans. With average credit card interest rates sitting at 17.40 percent (at the time of publication), the SCRA can cut interest rates for servicemembers by nearly two-thirds, making it a valuable tool to reduce or eliminate debt quickly.

“I wish I’d known about it when I was a new lieutenant,” says the anonymous blogger behind the Military Dollar personal finance blog. “I hate to think about how much extra interest I must have paid because I never applied for SCRA benefits!”

Beyond the 6 percent interest cap, the SCRA protects against repossessions and non-judicial foreclosures on property you owned prior to military service and penalties resulting from the termination of a residential lease. In addition to helping you keep your property (and housing security deposit), this can help you avoid negative marks on your credit. A car repossession alone can lower your score by 100 points and stay on your credit report for seven years. Taking advantage of the protections offered by the SCRA while you’re eligible can have lasting effects on your financial health, even after you leave service.

Military Lending Act

While SCRA benefits apply to loans and property taken out prior to military service, protections under the Military Lending Act (MLA) cover new loans taken out by active-duty servicemembers and their dependents. At the heart of this law is a 36 percent cap on certain consumer loans, which includes many finance charges and fees. According to the Consumer Financial Protection Bureau, the MLA applies to credit cards, some student loans, certain installment loans and payday loans, among others.

Besides this rate cap, the MLA offers active-duty servicemembers additional protections:

  • You can take creditors to court, even if you agree to terms and conditions that include a mandatory arbitration clause.
  • You can pay off your loans early, without fear of a prepayment penalty.
  • Creditors cannot require you to have money automatically withdrawn from your paycheck in order to get a loan.

Extra card benefits

“Many credit card companies offer benefits that go far beyond the requirements of the law,” says Kate Horrell, a military finance coach whose husband is in the military.

For example, some card companies will waive annual fees or cut interest rates on new cards. Others will lower rates well below 6 percent or refund interest or fee charges that don’t technically qualify for SCRA protection. Some military members, for example, have received refunds on credit cards owned solely by their spouses.

“It’s not what the law requires. It’s something that they’re doing as a perk or benefit,” says Horrell. “I know military members who are getting thousands of dollars of interest refunded.”

For example, among the card companies known to offer extended benefits:

  • Capital One caps rates for cards and other eligible loans at 4 percent – 2 points less than what’s required by law, says Capital One representative Amanda Landers. It also waives all fees associated with a credit card, including expedited processing fees for a replacement card, late payment fees, cash advance fees, balance transfer fees, over-limit fees and more.
  • USAA also caps rates at 4 percent for both pre-existing debt and new charges, says USAA representative Matthew Walters. USAA also gives cardholders up to year after active duty has ended to request retroactive benefits. As of Dec. 20, 2019, though, this will be reduced to six months.
  • American Express waives annual fees on new cards, including cards with high annual fees such as the American Express® Gold Card and the Platinum Card® from American Express. It may also waive other charges. “We encourage our military servicemen and women to contact us directly to hear about the specific benefits and fee waivers we have available to them,” American Express representative Charlotte Fuller wrote in an email.
  • U.S. Bank also waives fees for service members. “U.S. Bank is proud to serve our service member customers with a variety of credit cards and lending benefits that fall within the Servicemembers Civil Relief Act (SCRA) and Military Lending Act (MLA),” former senior vice president Cliff Cook said in a 2018 email. “In addition, we do offer additional benefits, such as waiving annual fees and late fees for these customers.”
  • Bank of America offers reduced interest rates on military-themed affinity credit cards and all SCRA-eligible cards for up to six months after a service member leaves active duty, says Bank of America representative Betty Riess.
  • Discover grants SCRA benefits to military spouses or domestic partners, says Discover representative Jeremy Borling, even if the service member isn’t listed on the card. Under the SCRA, lenders are only required to extend benefits to spouses with jointly held cards. It also extends SCRA benefits on new cards. “Many of these additional benefits are aimed at making it easier for service members to access them,” he says.

Retroactive refunds

Card issuers also should refund charges, such as annual fee or interest payments above the 6 percent rate cap, that service members incurred before they applied for benefits. “I had several friends who got annual statement credits for all the years that they’ve been active duty,” says Kerr.

In addition, some card companies will even refund interest rate or fee charges that service members and their spouses incurred years before entering military life. For example, Bailey Cummins, an Army wife, saved thousands of dollars in interest charges on her Discover card after she asked if it would qualify for SCRA relief.

“Discover went beyond what they were required by law,” says Cummins. “At the time that we received the benefit, my husband was not on the card.”

In addition, “I had applied for the card long before we got married, but they approved it for SCRA benefits, which was very generous of them, and I was super grateful.” Discover even refunded interest charges dating back to when Cummins first opened the card – nearly three years before she became a military spouse.

“It’s not what the law requires. It’s something that they’re doing as a perk or benefit. I know military members who are getting thousands of dollars of interest refunded.”

“I think they’re doing it as a thank-you to military service members,” says Maxwell.

Lucrative perks

Maxwell recently opened an American Express Platinum card and didn’t have to pay a penny of the $550 annual fee that Platinum cardholders are typically charged because her husband is a military lawyer on active duty.

“It was a brand-new card, so they don’t necessarily have to do that,” she says.

In addition, American Express waived other ancillary charges, such as over-limit and late payment fees. Because it’s so expensive, the Platinum card is not a card she normally would have applied for, says Maxwell. “But it’s free.”

Just by opening the card, she’s already pocketed hundreds of dollars’ worth of benefits for new cardholders, including a $200 airline fee credit, a $100 credit for TSA Precheck or Global Entry, free Uber credits and more.

The Platinum card is one of the most popular cards amongst military finance bloggers, thanks to its lucrative perks and exclusive freebies for Platinum card members.

“They have a huge sign-up bonus that I used to travel to Europe,” says John, an active duty Coast Guard member who runs the blog Military Fire and prefers to remain anonymous. (The welcome offer is available to new cardholders who meet minimum spend requirements within a specified time-frame.)

However, military credit card holders also have access to a wide range of other premium annual fee cards that offer ample bonuses on groceries, gas and travel, provided they have the credit scores to qualify.

Premium cards that have their annual fees waived are especially popular with military bloggers because they provide so many opportunities to rack up rewards on the go.

“I think that is one of the awesome benefits of being in the military,” says Andy Sheep, a naval officer who helps run The Military Frequent Flyer blog. “Travel alone is a benefit in itself, but to get even more rewards on top of that is icing on the cake.”

Some trips require service members to use a government credit card, says Sheep. But others allow cardholders to get around those requirements or use their cards for personal expenses.

Rules, tips for applying

To get SCRA benefits or related perks, service members must contact the credit card company directly and ask what benefits it offers. Some, such as Capital One and American Express, allow you to apply for benefits online. Others require you to call and send proof of your status, such as military orders.

Ask if the card company offers any benefits that go above and beyond the SCRA, says Doug Nordman, a retired military officer and author of  “The Military Guide to Financial Independence and Retirement.” Not all card companies will be willing to extend more generous benefits, but it doesn’t hurt to ask.

“They might lower interest rates, they might waive annual fees and they might go back in time and lower interest rates or retroactively waive annual fees,” says Nordman. “Every card issuer does it differently.”

Some issuers have also scaled back the benefits they offer military families, so don’t be surprised if a card issuer that was rumored to offer benefits no longer does.

If a company denies your request, “Let it go,” says Cummins. “If they don’t go beyond what the law requires, that’s their choice. We’re not entitled to these things. We’re only entitled to what the law requires of credit card companies.”

Veterans, military families can benefit too

Active-duty service members aren’t the only ones eligible for special credit card rates and benefits. Cards specifically targeted to members of the military and their families, such as those from Navy Federal Credit Union, Pentagon Federal Credit Union and USAA, for example, historically offer lower-than-average rates and fewer fees. Many of them also have decent rewards for cards with such low rates.

“Those are good cards to start out with,” says John of Military Fire. “Those cards usually don’t offer huge sign-up bonuses.” But they typically offer safer terms.

Once you’ve established your credit and proven that you can comfortably manage your balances, which is reflected in higher credit scores, you can then upgrade to a more lucrative high-end card.

Just be sure you continue to pay your bills on time and avoid overcharging, says Maxwell. Your credit score is especially important when you’re a member of the military because a bad score could alter your ability to do your job.

“Credit is very important for service members,” she says. “If you have a top-secret clearance, your credit history affects your clearance.”

The government may decide it can’t trust you if you have problems with your credit. “I think service members often don’t think about how it could affect your career in the long run if you don’t take your credit seriously.”

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Published: October 5, 2019

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