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Law Helps Active-Duty Military Pay Down Their Debt for Less

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When you’re serving your country on active duty in the military, you shouldn’t be struggling to pay down your credit card debt.

That’s one of the basic tenets of the Servicemembers Civil Relief Act, a law designed to offer financial protections to service members. Among its many benefits, the SCRA is perhaps best known for requiring lenders to cap interest rates on debt incurred before active-duty service. This rule can give you some breathing room to pay down your balances at a lower cost.

The hitch: These low rates don’t kick in automatically. You have to ask for them.

How does it work?

The SCRA’s so-called 6% rule requires issuers to cap annual percentage rates at 6% for debt incurred before a borrower went on active duty. It applies to all types of debt, including mortgages and auto loans. But it’s particularly helpful with credit card debt, because these balances usually carry higher interest rates. By law, the lower rates for credit cards last for the duration of your service period.

To get this protection through your credit card issuer, you can make a request either online or by mail, up until 180 days after your service period ends.

The 6% rule comes with two important caveats:

  • Your credit card debt can still affect your credit scores. It’s against the law for issuers to make an adverse credit report just because you exercised your rights under the SCRA. However, your scores can still suffer if you’re carrying a lot of debt or missing payments.
  • The rule applies only to debt incurred before service — not during. That means your issuer doesn’t have to give you 6% APR on new purchases.

However, a few major issuers go above and beyond what the law requires. They may offer 0% APR on new purchases or extended low-interest periods to active-duty service members. Issuers also generally waive service fees, such as annual fees and late fees. Depending on your issuer, filing for these benefits might be a more cost-effective way to save on interest than moving your debt to a new 0% balance transfer credit card.

» MORE: Major issuers’ benefits for service members on active duty

Who can qualify?

The parts of the SCRA that protect you from future liabilities, such as protection from eviction, apply to all active-duty service members. But for the 6% rule, which applies to liabilities that already exist, it’s not as clear-cut.

Technically, “a court may grant a creditor relief” from the 6% rule if a service member’s active duty doesn’t materially affect his ability to pay his credit card bills. For example, if a card issuer didn’t grant interest rate relief to an officer with a high salary, and the court decided the officer could cover his or her debts without assistance, that decision would hold.

But in practice, major issuers err on the side of good public relations, often offering SCRA benefits — even ones that are better than the law requires — to all active-duty service members. You’ll generally qualify for these benefits if you:

  • Serve in the Army, Navy, Air Force, Marine Corps or Coast Guard.
  • Actively serve in the National Guard, responding to a national emergency declared by the president and supported by federal funds for more than 30 consecutive days.
  • Are a commissioned officer for the Public Health Service or the National Oceanic and Atmospheric Administration.
  • Are absent from duty because of sickness, leave or other reasons.
  • Took on debt jointly with your spouse, who fits one of the criteria above.

In addition, some issuers will give you SCRA-like interest rates on your credit cards even if you don’t fit these criteria. To see whether you qualify, call your issuer and ask.

Even if you’re not carrying credit card debt, it’s still a good idea to notify your issuer about your military orders, especially if it can save you from paying an annual fee.

» MORE: How to pay off debt

How do you get these benefits?

Every issuer has a different method of fielding SCRA requests. But, generally, it’s a three-step process:

  1. Contact your credit card issuer. If your issuer doesn’t offer instructions for getting SCRA benefits online, call. Try the line for military service members, if your issuer offers one.
  2. Do the paperwork. Issuers will usually ask you to fill out a form to claim these benefits, either online or by mail. Some might verify your service through the SCRA database, while others will ask to see your military orders. To qualify, file for these protections no later than 180 days after you’re released from service.
  3. Get confirmation of your SCRA eligibility. Your issuer could take anywhere from a few seconds to two months with this step. Once you get the confirmation letter listing your account’s new benefits, keep it for future reference.

If you’re having trouble claiming these protections, file a complaint with the Consumer Financial Protection Bureau or seek legal assistance from the U.S. Armed Forces Legal Assistance Program. At the very least, asking for help could help you get the protections you deserve a little faster.

Claire Tsosie is a staff writer at NerdWallet, a personal finance website. Email: claire@nerdwallet.com. Twitter: @ideclaire7.