Money Related Articles

Active Duty? Learn How to Lower Debt Costs

Woman on the phone holding a credit card.

Content provided courtesy of USAA. 

Military service need not come with heavy financial or legal burdens.

The Servicemembers Civil Relief Act offers military professionals a variety of protections. Taking full advantage of your SCRA rights begins with knowing what they are and how they work.

If you enter active duty and have an existing credit card, auto loan, mortgage or other debt, you may be entitled to a lower interest rate. The SCRA prohibits lenders from charging more than 6% interest on debts incurred prior to active service. The coverage for credit accounts is the period of active duty. For home loans, the coverage is the same period, plus one year.

"Credit card accounts alone could result in savings of hundreds of dollars in interest," says JJ Montanaro, a CERTIFIED FINANCIAL PLANNER™ with USAA. For example, reducing an eligible 14.5% interest rate card with a balance of $5,000 to 6% could save you almost $500 during a 15-month period.

To take advantage of this rate cap, the SCRA requires you to:

  • Notify your lenders; and
  • Send them a copy of your military orders.

 There are some exceptions, however. Service members also should understand that SCRA rules don't apply to debts incurred after entering active duty.

It's worth noting that under SCRA, if you're assigned overseas or to an area where your cellphone provider doesn't have coverage, you may cancel the contract with no penalties and fees.

You also may be entitled to life insurance protection benefits under SCRA. To learn more about eligibility requirements and to access the application for the Protection of Commercial Life Insurance Policy (VA form 29-380), contact the U.S. Department of Veterans Affairs office.

Other SCRA protections cover:

  • Terminating leases
  • Evictions
  • Foreclosure
  • Tax relief
  • Credit protection
  • Legal proceedings

For more details on these and for help understanding other rights under SCRA, contact your nearest legal assistance office or visit this U.S. government page.

Related Topics

Personal Finances

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Contributor

USAA, a diversified financial services organization, is the leading provider of competitively priced financial planning, insurance, investments, and banking products to members of the U.S. military and their eligible families. Rated among the highest among financial services companies for customer advocacy in a Forrester Research survey, USAA provides convenient and accessible financial products to its more than 9 million members. For more information about USAA, or to learn more about membership, visit usaa.com

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