Young Troops Face Welcome Surprise on Home Front
by Michelle M. Haas-Dosher
Soldiers returning from deployment overseas could be in for a big surprise when they see the balance in their credit union accounts. After months away, many will be in a better financial position than they ever thought possible and, for the first time in their lives, have more money than they know what to do with. Many have been serving in countries where there isn't much to spend money on, and most are receiving hazardous duty pay.
"Some soldiers have built up deposits that they've never had before," says John Moorhead, president and CEO of Fort Campbell Federal Credit Union in Clarkesville, Tenn.
Moorhead informs soldiers with built-up savings that they already have taken the first step to anchoring a financial plan--that is, having three to six months' income set aside for emergencies. Moorhead also encourages troops to leave the money on deposit to borrow against as share-secured loans. This establishes a systematic savings plan and helps them establish credit. They'll pay minimal interest.
A fool and money...?
During a deployment the credit union will see a rise in assets--growth in savings and checking accounts, says Elaine Tuten, CEO of Fort Stewart Georgia Federal Credit Union in Hinesville, Ga. "Twelve years ago during Desert Storm we found that, when the troops returned, the money quickly disappeared from the credit union.
Moorhead agrees. "Our experience following Desert Shield and Desert Storm was that many soldiers wanted to withdraw cash. This time we were prepared to encourage them not to do that, but rather take funds as an official check/cashier's check for safety reasons."
"There are entities just waiting for soldiers to return so they can take their money," Tuten adds. "Pawn shops, title pawns, payday lenders--all of those entities that surround a military base. The main thing we want to do is to take care of our young soldiers and their families and keep them from getting caught up in any of these financial traps," she says. Fort Stewart Federal strives to work with the military to educate soldiers about abusers and caution them about what they sign. "One of our goals is to teach them to use credit wisely."
"It's easy to stay on top of finances thanks to the online services that many credit unions provide."
Fort Stewart is a large military installation, Tuten says, but the town is very small. As soon as troops started returning, about 3,000 automobiles were sold.
Off to a smart start
Some lenders hesitate to help because the young soldiers have no track record. And, a lot of lenders won't finance large amounts for military members because of their mobility. When lenders do agree to finance loans they often charge very high interest rates. Tuten says she's seen rates as high as 20%. "The average age of soldiers buying autos is 22 years; they could get into trouble real easy if they're not careful about what they're doing," she says.
Even though the credit union makes risk-based loans, it takes a further chance on the troops. "Though we don't charge exorbitant rates, we do charge higher rates than we would for someone with established credit," Tuten says. Borrowers paying their loans in a timely manner earn another benefit: "Eventually soldiers may qualify to refinance and can end up with an even lower rate."
Some return to find their money gone and savings depleted.
Fort Stewart Federal established a program known as "Z," for "zero credit," to help returning soldiers. "Z" is an educational tool, according to Tuten. "We educate members about credit on the front end. Within the first 30 to 60 days of the loan we give them a letter explaining how important it is to pay loans and how important a credit history is, because it will follow them for the rest of their lives. We're also developing seminars about how to use credit and how to understand a credit report.
"Our ultimate goal is to take guys and gals who never have had credit before and are rated a 'C,' and turn it into 'A' credit," Tuten says. 'A' credit refers to those having top credit scores; 'C' credit refers to those having average credit scores. She says, We want to put them on the right track now at their young age and try to build them up as they repay the loan. We will write to them, congratulate them, and tell them how proud we are of them. We want to help them from getting into trouble. We want to make the loan at the credit union and then work with them during the entire term of the loan, teaching and encouraging them to handle money and how to handle credit.
"That's what the credit union is here for--to help them get off on that right foot," Tuten says. "In turn maybe they'll become lifelong members."
POA missteps
Though many soldiers return to the pleasant surprise of cash on hand, some return to find their money gone and savings depleted. This can happen when a soldier assigns power of attorney (POA) to the wrong person. A POA is a document that authorizes an individual to act on your behalf on matters of legal or personal significance if you're unable to act for yourself.
Soldiers have money for the first time in their lives, but never have been trained how to use it.
One thing that can save a lot of heartache is being smart about designating a POA before deploying. "We encourage soldiers to have a POA if they're leaving a family behind, but you never know if someone will take advantage of the situation," Tuten says. Soldiers should pay attention to the balances in their accounts and keep in touch about what is happening with finances back home.
"To have finances in order before deployment is key," Fort Campbell's Moorhead says. The most important thing married couples can do is to communicate with one another before deployment. The spouse left behind needs to know everything about the finances.
"A credit rating stays with you throughout life," Moorhead says. "If you've fallen behind on bills while deployed, communicate with creditors and make arrangements with them to repay what is owed."
He says, "It's easy to stay on top of finances while deployed, thanks to the online services that many credit unions provide." Audio response, home banking, automatic bill payer, debit cards, and credit cards allow military members to use the credit union any time, anywhere. Online services also can help married couples keep communication lines open.
Published February 16, 2004
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