We ask a lot of our military servicemembers, including hazardous duties and lengthy deployments. But often overlooked is the financial stress that active duty servicemembers face. Many of these service men and women are young, have families, and are earning a paycheck for the first time in their lives. Thankfully, there is a law called the Servicemembers Civil Relief Act (SCRA), that places restrictions on the rates and fees that they can be charged when renting a home, taking out a loan, and even using a credit card.
How the Servicemembers Civil Relief Act Affects Credit Cards
The SCRA offers generous benefits to active duty servicemembers who use credit cards, and many card issuers have chosen to go above and beyond the law to provide additional fee waivers and reduced interest charges. To start off with, the law requires that credit card issuers and other lenders limit interest rates to a maximum of 6% on debts incurred before becoming active duty servicemembers. This includes debts jointly incurred with a spouse.
The law also states that card issuers must adjust monthly payments to reduce them by the amount of the interest saved. In addition, card issuers must waive late fees, and there can be no penalty interest rate above 6%. This law applies to all branches of service including the Coast Guard, Reservists, members of the National Guard, and even Commissioned Officers of the Public Health Service or the National Oceanic and Atmosphere Foundation. These benefits begin when servicemembers enter the service full-time or when a Reservist or Guardsman receives his or her mobilization orders.
Card Issuers Going Above and Beyond the Law
Many credit card issuers have chosen to provide additional fee waivers and interest rate reductions to customers who qualify for the legally mandated SCRA. For example, some card issuers will waive all annual fees, allowing even servicemembers with modest incomes to afford to carry expensive premium travel rewards cards with benefits such as priority check-in and business lounge access. And while these kinds of travel benefits might seem more suited to a business traveler than an active duty soldier, sailor or airman, remember that many servicemembers are constantly traveling to bases around the world, often using the same commercial air travel system that civilians use.
When it comes to interest rates, some credit card issuers go beyond the law by limiting servicemembers rates at 4%, while others even waive all interest charges on accounts opened prior to entering active duty, and others waive interest and fees incurred during deployments only.
Activating Your Benefits
Eligible servicemembers should contact their card issuers when they enlist to request these benefits. And while there are reports that some customer service representatives are unfamiliar with SCRA benefits, many card issuers offer a special number to reach representatives that are military specialists. In addition, eligible servicemembers can even apply for this benefit retroactively up to 180 days beyond leaving active duty.
Serving your country can be a challenge, so it's only fitting that the laws, including the credit card industry, have taken steps to make it easier and less expensive for our servicemembers to manage their credit cards.