Choosing a Credit Card? Consider Military Community Options

August 31, 2020

This article by Karen Jowers originally appeared on Military Times, the nation's largest independent newsroom dedicated to covering the military and veteran community.

Take your time to do your research when choosing a credit card. That thorough comparison will pay off for you in the long run.

Before you start comparing credit cards, though, look at your personal situation and spending habits to decide what features are important to you.

A recent analysis by the Consumer Financial Protection Bureau show that most service members don’t have a credit card when they enter the military, but begin opening credit accounts three to six months after they enter. Their analysis showed that by age 24, over 90 percent of service members had access to some sort of revolving credit, such as a general-purpose credit card or retail credit card.

The FINRA Investor Education Foundation’s SaveAndInvest.org site advises looking at your whole picture of credit card use, and warns against picking a credit card simply because it offers an introductory promotion, such as low “teaser” rates. Look at what the interest rate would be after the introductory period ends.

How will you use the credit card? To build a credit history? To pay for almost everything in order to avoid carrying cash, and to earn rebates? To pay for a large purchase over time, carrying a balance?

In the best of all worlds, you’ll be paying off your credit card in full each month, so the interest rate may not be as important to you as other features, such as rewards points for discounts or cash back. But if you carry a balance, that interest rate is the most important number you have to worry about. On a $5,000 balance over a year’s time, a 20 percent annual percentage rate (APR) would cost you $1,000. Many cards have a range of interest rates, and the better your credit score, the lower your interest rate.

Looking to build your credit? Many card issuers offer secured credit cards, where you deposit money into an account to establish your credit line. These cards charge an annual fee, which vary by lender, so shop carefully.

Click over to the fine print to examine the features of the card, and some terms that you might not want. Some cards charge an annual fee. Weigh that cost against the other perks the card offers to see if it’s worth it.

Check the fine print on cards that offer low- or zero-interest balance transfers for a period of time. Does the card charge a fee for the balance transfer? If you make other purchases on the card during that time period, do your payments go first to the zero-interest balance, or to your monthly purchases? Interest may be charged on those purchases, unless the purchases also have a zero-percent APR, or you pay off the entire balance -- including any transferred balance — in full, each month.

Many cards offer rewards points, which can be used for cash back, discounts on travel or retail, or other. Look to see how those reward points can be used, and how easy it is to redeem them. Sometimes the rewards are expressed in percentages, such as 2 percent cash back rewards. When there are multiple ways to redeem the rewards, they’re usually expressed in points, and the value of the points depends on how you’re redeeming the points. For example, you might redeem a reward for 2 percent cash back, but it might be worth more in a participating retailer’s merchandise gift card.

If you want a card that offers cash back specifically —for example, deposited to your bank account — read the fine print carefully to make sure those rewards can be used for cash back. Some offer more rewards points for purchases at grocery stores, which could be helpful to many of us buying more groceries and eating at home more during the pandemic. But if you don’t pay off your credit card each month, the value of those rewards will diminish because of the interest fees you’re paying.

As you’re comparing credit cards, explore some credit card options in the military community, offered by banks and credit unions on installations, and some that are available worldwide, such as PenFed, Navy Federal Credit Union, and USAA. The military exchanges’ Military Star card is accepted widely on installations, too. These credit card options are open to virtually all in the military community, including veterans.

Don’t forget to check out some other credit card issuers, making some comparisons at sites like bankrate.com and creditcard.com. And to calm the chaos in your head, consider creating your own spreadsheet for comparisons, or use this “choosing a credit card worksheet” from FINRA’s saveandinvest.org.

We looked at a few basic features, such as annual fees, interest rates and rewards programs for some credit cards available in the military community. But as you compare, delve deep into other terms and features, such as balance transfer fees, credit limits, late payment and other fees, penalty interest rates if you’re late with payments, discounts on things like rental cars, protection for cell phones.

Here are just a few examples as you start your search. The interest rates are variable, and most have ranges that depend partly on the applicant’s creditworthiness, and were current as of Aug. 26:

The Military Star card, which is administered by the Army and Air Force Exchange Service for all the military exchange services, has no annual fee, and charges an interest rate of 10.24 percent APR regardless of your credit score. That’s generally low for a retail store credit card, but you might find a lower interest rate on a general-purpose credit card elsewhere. It charges zero interest for military clothing plan purchases. It’s accepted at commissaries, exchanges, gas stations and many other retail outlets on base, as well as at the exchanges’ online shopping sites, the Armed Forces Recreation centers, and others, but it’s not accepted at civilian commercial locations.

Military Star offers two rewards points for every $1 spent, and often the rewards points are bumped up for certain time periods at some outlets, such as gas stations. When rewards reach 2,000, a $20 gift card is automatically earned, and can be used for merchandise or services anywhere the Military Star card is accepted.

Important note: Pay that Military Star card bill. Unlike other credit card issuers, the administrator of the Military Star card doesn’t have to get a civil judgment against a card holder to garnish a service member’s pay through the Defense Finance and Accounting Service.

PenFed Credit Union’s credit cards don’t charge annual fees, and offer a $100 statement credit when you spend $1,500 in the first 90 days. Their Gold Visa Card offers the lowest interest rate of its credit cards, with a variable rate between 7.49 to 17.99 percent APR, depending on creditworthiness.

Their Power Cash Rewards Visa Signature Card offers 2 percent cash back on all purchases for PenFed Honors Advantage members, or, otherwise, 1.5 percent cash back on all purchases. The APR varies between 14.99 to 17.99 percent, depending on creditworthiness. The Platinum Rewards Visa Signature Card, with an APR between 13.49 to 17.99 percent, offers five points per dollar on gas purchases, three points at the supermarket, and one point for all other purchases.

USAA’s credit cards have various features and no annual fee. For example, for those looking for a low-interest card, the USAA Rate Advantage Visa Platinum Card has a variable rate ranging from 6.90 percent to 23.9 percent APR, depending on creditworthiness. It might be worth considering if you carry a balance from month to month.

USAA also has six rewards cards. Among them, their USAA Rewards American Express Card, with APR rates ranging from 9.9 percent to 25.9 percent, offers three points for every dollar spent on dining out; two points on gas and groceries; and one point for all other purchases. It offers 2,500 bonus points after your first purchase.

Their Cashback Rewards Plus American Express Card offers 5 percent cash back on the first $3,000 in combined gas station and military base purchases each year; 2 percent cash back on the first $3,000 in grocery purchases each year, and unlimited 1 percent cash back on all other purchases. It carries an APR of between 11.9 to 25.9 percent interest.

Navy Federal Credit Union has various credit cards with different rates, fees and rewards. There are no balance transfer fees. Their Platinum Credit Card offers variable interest rates between 5.99 to 18 percent APR, geared more for those who carry a balance. Their More Rewards American Express Card, with a variable rate between 9.65 to 18 percent, offers three points for each dollar spent at restaurants, food delivery, supermarkets and gas and transit, and one point for everything else.

Their Visa Signature Flagship Rewards card charges an annual fee of $49. But with its rewards program you might come out ahead if you pay the balance each month. The APRs varies between 9.99 percent and 18 percent. You earn three points for each dollar spent on travel, and two points for everything else. If you spend $2,450 in a year’s time on anything from groceries to Christmas presents, you’d earn $49 which you could redeem as cash.

Their nRewards Secured card, for those who want to build credit, carries an interest rate of 18 percent, with no annual fee, no balance transfer fees, no cash advance fees, no foreign transaction fees. You also earn one point for each dollar spent.

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