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The SCRA caps the interest rate charged to active-duty service members at 6% per year on pre-service credit card debts and forgives fees. If you accumulated credit card debt prior to joining the service, you’re entitled to have your interest rate reduced to 6%. The SCRA also covers pre-service personal loans, auto loans, student loans and home loans. The reduced interest rate will apply during active service and continues until one year after you’ve left active duty.
SCRA benefits are available from any credit card issuer, and some lenders go beyond what the law requires. For example, Navy Federal caps rates at 4%. Capital One also limits interest to 4% on eligible loans and credit products owned and serviced by the bank and charges no fees except for bona fide insurance.
Some issuers may even cover credit cards you open during active service. So always ask your issuer what its SCRA policy is so you can take advantage of every benefit the lender offers.
The right military card will match your credit profile and fit your spending habits and financial goals. These tips can help you choose a military card:
Know your credit score. Before you start researching credit cards, determine your credit score. Each time you apply for a credit card, it results in a hard inquiry on your credit report. Each hard inquiry can knock up to five points off your score. By knowing your score, you’ll avoid applying for credit cards you are unlikely to qualify for. You can find your free score in a number of ways, including from current credit card issuers, your local bank, free credit score apps or websites that offer free educational scores.
Ask the issuer whether any SCRA benefits apply to a new account. Contact the credit card issuer directly by phone or online for an answer if you’re an active-duty service member thinking about opening an account. As already noted, SCRA benefits apply to pre-service debts, so the issuer is not obligated to provide them when you are opening an account.
Look at all card features. Consider the rewards, travel perks, purchase protections and other benefits, such as whether a free credit score is offered. Do note the APR since you might not have a 6% rate after you leave active duty, depending on the issuer’s policy. And if you spend time overseas, a credit card that waives foreign transaction fees is a good choice.
Compare bonuses and introductory rates. Which card has the biggest sign-up bonus with an easily attainable spending requirement, and which card has the longest 0% introductory APR period for purchases and balance transfers?
Once you’ve weighed interest rates and fees into your decision, you can shop around for the best offers and apply for one. If you are worried about card approval, check whether you can prequalify to indicate your chances with no credit damage.
When you get a credit card, focus on using your card responsibly. Create a budget, set limits for credit card spending, track your expenses and keep low utilization ratios on your credit cards.
There are definite perks that can come from a military credit card, but beware of some of the drawbacks, as well.
- Qualify for a lower interest rate. Although the SCRA applies to debt accrued before active-duty status, a credit card for military may match that rate or at least offer a lower rate than other cards.
- Get additional perks. Some credit cards may offer additional perks beyond a lower interest rate, such as waiving fees, so be sure to ask when considering your options.
- New cards may not qualify. Because SCRA benefits apply to pre-service debts, the issuer is not obligated to provide that interest rate when you are opening an account. Be sure to ask.
- Your interest rate may change. Once you’re no longer considered active duty, your interest rate may go up, depending on your card.
Can Military Families Get SCRA Protections?
Under the SCRA, active-duty service members and some of their dependents are eligible for a 6% interest rate cap on pre-service debts incurred. Some issuers exceed the requirements of the SRCA. So always ask your lender what the policy is for you and your dependents.
The law defines dependents as a spouse, child or anyone who got more than half of their financial support from the service member during the 180 days prior to requesting SCRA protections. Note that there are age restrictions and rules that apply to children up to age 23, so ask your lender if your dependents qualify.
U.S. News reviewed hundreds of credit cards to identify those that offer the most value to members of the military, considering factors including rates, SCRA policies, rewards and fees. Each card has its own strengths and drawbacks, so there is no single card that’s ideal for all military members. U.S. News’ selections reflect the best card in each category that may be a good fit for your needs.