Interest rate reversal may be due to military debt 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 CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question Dear To Her Credit,
My husband is currently in the military and deployed. We owed $7,000 on his Chase card, but we paid off the entire balance. His previous statement showed the balance without a minus sign in front of it.

Now that we’ve paid off the balance, the statement says there is an interest payment reversal for -$24. When I try to pay that off it says there is nothing to pay off and that the account is completely paid.

So what does interest payment reversal mean? And why the negative sign before it? Does that mean we overpaid and they will refund us? Thank you for your help!  – Alex

Answer

Dear Alex,
You are right. A negative (minus) sign in front of your balance means that the bank owes you, not the other way around. The minus sign represents a “credit” balance on your account.

The interest payment reversal, in your case, may be the result of the Servicemembers Civil Relief Act, or SCRA. The SCRA covers all active-duty service members, reservists and members of the National Guard and protects them and their spouses from high interest rates on debts, including credit card debt, federally guaranteed student loans and car loans while they are on active duty.

The protection begins on the date of entering active duty and generally terminates within 30 to 90 days after the date of discharge. This protection applies only to debt balances from before the active duty began. Lenders must also waive fees, such as annual fees or late fees, if those charges exceed the 6 percent cap.

The highest rate that credit card companies can charge you and your husband on protected debt while your husband is deployed is 6 percent. This is not simply an interest deferment. The interest expense over 6 percent while the service member is deployed is permanently forgiven.

To request interest reduction, service members generally send a written request letter, including a copy of military orders, to the bank. They must send this letter no more than 180 days after the service member is released from active duty.

If the $24 interest expense reversal was as the result of the SCRA, you should make sure that the 6 percent maximum rate was applied to the entire time your husband was deployed and you owed a protected balance.

If you owed the entire $7,000 for very long while he was deployed, I would expect the interest adjustment to be substantially more than $24. If you can’t tell when or what the interest rate was that you were charged for the period of deployment by looking at your monthly statements, call the number on the back of your card and talk to a bank representative.

It’s also possible that the interest expense reversal had nothing to do with the SCRA rate limitations. The bank may have discovered a mistake, or made an adjustment for some other reason after you paid off the balance. As long as it’s an interest adjustment in your favor, I wouldn’t worry too much.

Banks don’t usually send refund checks right away when there is a credit balance. If you use the card for a small purchase, you can easily use the $24 credit and be back to a zero balance. If the balance remains on your account for six months, federal regulations require the bank to try and contact you and refund the money to you.

If you don’t want to use the card now that you have it paid off, or if you want to close the card, you can call the number on the back of the card and ask Chase to send you a refund check for the $24.

See related: A guide to credit for service members and their families, Military credit cards: Rewards for service members, What happens if you overpay your credit card bill

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Updated: 07-20-2018