Military members protect the country, so their financial well-being is protected by law. In 2003, Congress passed the Servicemembers Civil Relief Act, which allows for lower interest rates on credit cards while in service. But more than 20 years later, this benefit is not being fully utilized, leaving many service members paying far more interest on their loans than they should.
A 2022 study by the Consumer Financial Protection Bureau found that members of the National Guard and Reserves “rarely take advantage of interest rate cuts on credit cards.” The study’s authors speculated that the underutilization was due to a lack of awareness of the SCRA and service members’ responsibilities in applying for benefits.
In early 2024, a bill was introduced to increase awareness and streamline the application process. To that end, the SCRA Benefit Utilization Improvement Act aims to increase the number of military members who receive SCRA benefits.
As an active duty military member, you can save hundreds of dollars in interest and other credit card-related fees. Understanding the inner workings of the SCRA, its sister law, the Military Lending Act, and the policies of your credit card issuer can help you reap the savings to which you are legally entitled.
Lower credit card interest rates
Under the SCRA, interest rates on loans incurred prior to the date of active service may not exceed 6% during active service. Since today’s credit card interest rates are often 20% or higher, this benefit can have a significant impact on service members with large credit card balances. The SCRA also prohibits lenders from retroactively increasing loan interest above 6% upon the expiration of active service.
The following service members are eligible for rate reduction benefits:
- Active duty members of the Air Force, Army, Coast Guard, Marine Corps, and Navy.
- Active-duty reserve military personnel.
- National Guard members have been mobilized under federal order for more than 30 consecutive days.
- Active duty officer of the Public Health Service or the National Oceanic and Atmospheric Administration.
“For debt incurred while in service, the Military Lending Act comes into play,” says Vanessa Alanis, a certified financial planner in Manassas, Va. The Military Lending Act states that issuers may not charge a military annual percentage rate (MAPR) of more than 36%. The Military Lending Act requires issuers to include credit card fees, such as annual fees, when calculating the MAPR.
The MLA protects the following service members and their families:
- A member of the Regular or Reserve Component of the Air Force, Army, Coast Guard, Marine Corps, Navy, and Space Force who is on active duty pursuant to a call or order not specifying a period of 30 days or less.
- Active Guard and Reserve members.
Other credit card offers
Alanis said some card issuers offer credit card benefits to active-duty military personnel that go beyond the protections provided by the SCRA and MLA.
In addition to the annual fee
Some credit card issuers, including Bank of America, Capital One, Chase and American Express, are waiving any annual fees associated with their credit cards. Depending on the card, this offer can save you a ton of money. Some of the best credit cards on the market today charge nearly $700 in annual fees, but they also offer coveted perks like travel points, airport lounge access, free flight companion tickets and statement credits for TSA PreCheck or Global Entry.
Waiver of other fees
Many card issuers that waived annual fees are also lenient on other credit card fees. For example, Capital One, Chase and US Bank explicitly state that they are waiving all credit card fees, including late payment fees, balance transfer fees, chargeback fees and cash advance fees.
Interest rate below 6%
The SCRA caps interest rates on credit cards opened before military service at 6%, but some issuers charge even lower rates. Navy Federal Credit Union, USAA, Capital One, and Chase cap interest rates on credit cards for active-duty members at 4%. Barclays Bank drops the APR to 0% for credit cards opened before military service.
How to enjoy credit card benefits
Service members who qualify for MLA protections will automatically receive these benefits without taking any action. However, service members are responsible for obtaining SCRA protections. They must apply for benefits directly with their lender and submit documentation proving active duty. A separate interest reduction application must be submitted for each account, even if held with the same lender.
Lenders must accept applications for rate reductions while on active duty and within 180 days after service ends. However, service members who submit applications after their service begins will receive a refund of all interest accrued over the 6% limit since the start of their service. “It’s never too late to contact your credit card company to learn about this benefit while you’re in the military,” Alanis says.
Alanis reminded service members that the base’s Personal Financial Management Office can provide further education and assistance to those trying to apply for SCRA benefits.
