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Game Changer: SCRA and MLA

Servicemembers Civil Relief Act and the Military Lending Act Explained

But wait, there’s more!  Earlier I mentioned how you need to get over the mental block of paying annual fees for credit cards because the benefits will outweigh the cost.  Well, turns out Uncle Sam gave you an out in exchange for serving this great country. Two outs, actually, called the Servicemembers Civil Relief Act (SCRA) and the Military Lending Act (MLA).

The SCRA

The SCRA is one of the best-kept secrets in the Army and we do a terrible job at educating our subordinates on it.  Everyone knows a deployment or PCS orders can get you out of a pesky apartment or auto lease and we have the SCRA to thank for that. But the benefits go so much deeper.  Turns out, if you had some debt as a civilian and then went into active military service, the SCRA has some rules for lenders to follow.  Any debt or debt account you had before joining the ACTIVE military is now capped at 6% interest while you are active.  All you have to do is call and ask for SCRA benefits to be applied to your account and fax/email your orders.  The lenders will even retroactively reduce your interest rates to 6% since you went active and if you’ve been paying a hefty 16-25% interest on credit card accounts, you get a sweet refund check in the mail.  But guess what else also generally gets waived?  Annual fees.

Almost every major bank out there will waive your credit card annual fees if the account was opened prior to your entry into active duty (and retroactively refund all the fee’s you’ve paid since going active).  Some banks are extremely generous and even waive your fees on ANY account you open at ANY time, regardless of if you’re already active or not.  American Express is the only ones left to guarantee SCRA benefits on your card accounts, regardless of the opening date.  Barclays used to, but we think we broke them off by getting their Luxury Card Gold Card ($995 annual fee) for free.  As of 2017, Barclays one of the most restrictive banks with SCRA benefits.  Sometimes, and no one knows how exactly, you can get lucky with Chase and get SCRA applied to card accounts opened after your active duty date.  The current speculation is if you are somehow affiliated with Pennsylvania, Louisiana, or Ohio, as their state laws add to the SCRA.

The MLA

Times were good, AMEX accounts were fruitful, Chase was a roll of the dice, and then Uncle Sam said: “We can do better.”  Enter the Military Lending Act.  The MLA was a bill passed around 2008 or something but didn’t take effect for banks until Oct of 2017. It’s a very very loosely written bill that in essence states banks cannot charge military members more than 36% interest on any sort of debt to include all the fees associated with debt-bearing accounts.  Now, that may seem like a huge amount of interest but what happens when you have a credit card with a $450 annual fee and you only have a $1 charge on it?  According to the MLA (we think, again it’s open to some serious interpretation) that’s a 450% interest charge.

So to avoid the possibility of major government penalties, most banks are now waiving annual fees on credit cards for all accounts opened after 20SEP17, I’m pretty sure automatically (without having to ask, unlike with SCRA).  Welcome to the party: Chase, US Bank, and Citi.  Bank of America offered MLA waivers for a short 3-6 month window after the law took effect, however, have since reversed their policy and no longer grant waivers.  Barclays remains waiver adverse.

Recap

Under SCRA you can have any AMEX card you want, free of charge.  You can also get annual fees waived and interest over 6% refunded during active duty time for any card from any bank on accounts opened before you went active.

Under MLA you can have any Chase, US Bank, and Citi card you want, free of charge, so long as you opened it after 20SEP18.

Continue to Won’t This Hurt My Credit Score?

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