What You Need to Know about Military Credit Card Interest Rate Caps

What You Need to Know about Military Credit Card Interest Rate Caps

Military personnel often have unique financial situations, andcredit card companieshave recognized this fact by offering special benefits and protections for those in the armed forces. One of these protections is the Military Lending Act, which sets limits on the interest rates that credit card companies can charge active-duty military members and their families. In this article, we will explore the details of this act and what it means for military credit card users.

Overview of the Military Lending Act

The Military Lending Act (MLA) is a federal law that provides protections for military members and their families when obtaining consumer credit. It covers a variety of financial products, including payday loans, vehicle title loans, and credit cards. The act was designed to prevent predatory lending practices and to ensure that military personnel have access to fair and transparent credit.

One of the key provisions of the MLA is theinterest rate cap. Under the act, credit card companies cannot charge military members and their families an annual percentage rate (APR) of more than 36%. This cap includes all fees and charges associated with the credit card, such as balance transfer fees, cash advance fees, and late payment fees.

Who is Covered by the MLA?

The MLA covers active-duty military members, including members of the National Guard and Reserves on active duty, and their dependents. The act also applies to certain veterans and their dependents for up to one year after the veteran's discharge.

It is important to note that the MLA only applies to new credit card accounts opened after October 3, 2016. If you had a credit card account before this date, the interest rate cap does not apply to that account.

How the Interest Rate Cap Works

The 36% APR cap is a hard limit, meaning credit card companies cannot charge military members and their families more than this amount. This cap applies to all types of credit card transactions, including purchases, balance transfers, and cash advances.

It is important to note that the interest rate cap does not apply to fees that are not based on the APR. For example, if your credit card company charges a $25 late payment fee, this fee is not subject to the 36% cap.

Benefits of the MLA for Military Credit Card Users

The interest rate cap provided by the MLA can help military members and their families save money on credit card interest charges. This protection can be especially valuable for those who are in financial hardship or are struggling to make ends meet.

In addition to the interest rate cap, the MLA also provides other protections for military credit card users. For example, credit card companies cannot require military members to submit to mandatory arbitration in the event of a dispute. Instead, disputes must be resolved in court.

Tips for Military Credit Card Users

If you are an active-duty military member or a dependent, you should take advantage of the protections provided by the MLA. When applying for a credit card, be sure to look for lenders that comply with the act and offer the 36% interest rate cap.

In addition, it is important to use credit cards responsibly and to avoid carrying a balance whenever possible. Paying off your credit card balance in full each month can help you avoid interest charges and fees, which can add up over time.

Conclusion

The Military Lending Act provides important protections for military members and their families when obtaining consumer credit, including credit cards. The 36% interest rate cap can help military credit card users save money on interest charges, and the act also provides other important protections. By using credit cards responsibly and choosing lenders that comply with the MLA, military members and their families can take control of their finances and avoid unnecessary fees and charges.