The military personal finance world is aflutter over Commissary Military Star Card to Roll Out In October, by my colleague Amy Bushatz. It's true: In October, you'll be able to use your Star Card at the commissary. Most of the people with whom I've spoken think it is a terrible idea, but an objective evaluation shows more pros than cons.
Like any tool, the Military Star card can be used in a positive way, or in a negative way. Responsible use of credit can bring benefits, and irresponsible use of credit can create a whole mess of problems. To ensure that you're seeing the whole pictures, here are some of the benefits and drawbacks of allowing the Military Star card to be used at the military commissaries.
Possible Benefits:
Service members who have run out of money will be able to purchase affordable, real food on credit instead of buying expensive junk food at the Exchanges or Minimarts/Shoppettes.
The Military Star Card offers 2% cash back, in the form of rewards certificates.
May be used in the place of more expensive credit products. Credit cards are already being used at the commissaries. Presumably, some of those credit cards have higher interest rates than the Star Card's 10.24%. If the accounts aren't being paid in full every month, much better that the interest rate be lower.
Since many members are already using credit cards at the commissary, this may allow them to reduce the number of credit cards accounts they have.
Earlier command involvement in overdue or overextended credit accounts.
Possible Drawbacks:
Military families will accrue debt for their grocery shopping. If they don't pay it off, they'll start paying interest.
Service members who don't manage their Star card can be subject to disciplinary action from their command, and may have their wages garnished. The process for both these actions is significantly faster than the same process for regular, civilian credit cards.
Of course, every possibility will not apply to ever Military Star card customer. Just like any kind of credit, whether this is a good or a bad change is going to come down to the behavior of the individual. Some people will use this opportunity to increase their overall spending and accrue additional debt. Others will use this as another tool to manage their finances in a responsible fashion.
A lot of the comments at the Military.com Facebook page are saying that this will encourage service members to go into debt, and that they will suddenly start carrying a balance from month to month and paying interest. I think it's unlikely that opening up this new line of credit is going to change anyone's behavior. People who are going to accrue more debt are still going to accrue more debt, people who are going to pay their bills in full each month are still going to pay their bills in full each month. If anything, moving debt to the Star card will allow service members who are in financial trouble to get command assistance earlier in the process. While those service members may not like it, it's probably a good thing.
As for my family, I'm not sure yet. There are a couple of reasons why we may start using the Star Card for our groceries. First is the 2% cash back. We're only getting 1.5% back on our current grocery-buying credit card. (Yes, we're in the group that uses our credit card for everything.) Second, I was thinking that it would simplify our bookkeeping to have all our grocery purchases on one credit card. Upon further thought, we only do about half our shopping at the commissary, so that won't really be a benefit for us. We don't use our Star card for anything else, so I don't think we'll start using it just for groceries. We try to keep it simple here!
The option to use the Military Star card at the commissary will give service members more choices, but also the opportunity to possibly accrue more debt. How each member's experience ends up will be up to their own personal responsibility for their debts.
