Servicemember's Civil Relief Act
Board: Credit Cards and Consumer Debt

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By kpscott
March 2, 2007

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The Servicemember's Civil Relief Act (SCRA) was signed into law by President Bush in late 2003. It was a rewrite of the previous law signed in 1940 (Soldiers and Sailors Civil Relief Act (SSCRA or SSRA))that made some clarifications and incorporated into law some of the case law that had come from it in the preceding 63 years. For the purposes of this message board, there are some significant savings for servicemembers that bear repeating.

The law applies to all active duty service members, including Reserve and Guard who are called up for active duty. In short, any pre-existing commercial debt you have when you join the military must have the interest rate reduced to a maximum of 6%.

Here are some main points of interest to keep in mind:

* The act applies to all active duty military.
* While the law does require that you earn less money in the military than you did as a civilian, creditors will almost never ask you to prove this. They'll ask only for a copy of your orders.
* The interest rate reduction applies only to debt that existed before you entered active duty. Anything you charged after joining the service is exempt from the provisions of the act.
* The interest rate reduction is retroactive to your first day of active duty. I told a fellow servicemember about the act a year after he'd joined and he received a rebate on a year's worth of interest that he shouldn't have been paying.

While 6% is the cap put in place by this law, some lenders are more generous. As a personal example, I had a Visa card that reduced my interest rate to 0% and 0 payments for as long as I'm on active duty. That's a heck of a deal! I've been banking the payments I would have made in an interest bearing account, and now I have enough money to pay off the entire amount (over $7,000) when I decide to leave the service. Until then, it's earning interest for me every month!

For complete details of the act, read here.


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