5 Debt Relief Tips for Active-Duty Military

5/6/2024

Woman in military fatigues speaking with financial advisor.

More Americans are leaning on credit cards to pay for household necessities than ever before. The practice of “debit and forget it,” has turned into “credit and regret it.” Since interest rates are hovering above 20%, the process of paying off your card can feel like being on a debt treadmill – with your wallet being the only one getting a workout.

The challenge of higher credit card rates tends to hit a little harder for Service members and their families. Frequent moves, interruptions in employment for Milspouses, and housing shortages play a major role in the daily financial lives of the military community. Despite these challenges, there is hope for service members struggling with debt. A variety of debt assistance resources, including credit card debt relief programs, are available to Service members who are struggling with paying down debt. Here are five tips to consider for service members looking to regain control of their finances.

1. Speak to a financial counselor on your installation

Every branch of service offers financial counseling to their members.

Soldiers should visit the Army Community Service.
Sailors have Fleet and Family Support.
Marines have Marine Corps Community Services.
Airmen and Guardians have Military Financial Readiness.
Coast Guard members have Health, Safety and Work-Life Regional Practice.

2. Consolidate debt to a lower rate

Lower interest rates mean lower interest costs and hopefully an easier path to financial freedom. Military relief societies offer low or no interest loans to help with small cash flow problems, but don’t stop there. A Thrift Savings Plan (TSP) loan or credit card balance transfer could be useful to reduce the cost of your debt. Just be careful about balance transfer fees and leaning on these options too heavily. The last thing you want to do is use these options to mask larger money problems.

3. Deploy the Servicemembers Civil Relief Act (SCRA)

The SCRA provides important legal and financial protections to active-duty Service members, including the ability to reduce the interest rate on any preservice obligations to a maximum of 6%.

A study by the Consumer Financial Protection Bureau (CFPB) that focused on National Guard and Reservists revealed that fewer than 10% of eligible auto loans and 6% of personal loans received a reduced interest rate under the SCRA. Credit card debt was not studied, but the point here is to make sure you are taking advantage of this benefit.

4. Become a Debt Destroyer®

The USAA Educational Foundation offers a free online course tailored to Service members to help get out of debt. The six-step debt assistance program is a great place to start your debt destroying journey.

5. Enlist the help of a debt relief service

If you're dealing with overwhelming credit card debt that you can't pay off soon, consider reaching out to a nonprofit debt relief service for help. MMI can negotiate with your lenders to reduce your interest rates as part of a debt management plan, accelerating your repayment and saving money in the process, all with a single monthly payment that fits your budget.

Tagged in Military familes, Debt strategies

Steve Georgoulakis, CFP® is the product management director for the USAA Educational Foundation. Raised in a military family, he is a CERTIFIED FINANCIAL PLANNER™ professional with over 20 years of experience counseling and advising military families on improving their finances.

The USAA Educational Foundation is a nonprofit, tax-exempt IRS 501(c)(3) and cannot endorse or promote any commercial supplier, product, or service. The content of this blog is intended for information purposes only and does not constitute legal, tax, or financial advice.

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