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Interest rate is only one factor when comparing credit cards

Jan. 29, 2008 - 03:26PM   |   Last Updated: Jan. 29, 2008 - 03:26PM  |  

Listen up. A Navy chief wants to know why the exchange services' Military Star card carries a high interest rate.

"What I cannot understand is how we [the military] push our troops to take advantage of this great opportunity, but no one has questioned how [the Army and Air Force Exchange Service], one of the most invaluable military shopping and credit lenders, can continue to charge its military members 13 percent interest annually," Chief Hospital Corpsman Ronald Davis writes in an e-mail from Iraq.

"I would think any company directly affiliated with the military, in support of its troops, would make sure they had the lowest interest rates available."

The Military Star is a retail card managed by AAFES for all the exchange services. Sailors, soldiers, airmen, Marines and Coast Guard members can apply. National Guard and reserve members also are eligible.

"When directly compared to other consumer credit options, it is clear that the Military Star card offers a terrific value for military shoppers," AAFES spokesman Judd Anstey said.

Military customers can use the card to buy merchandise only in exchange stores, online or through the catalogs.

Retail cards generally have higher interest rates than bank cards. How does the Military Star card compare to other retailers' cards? Favorably, in fact.

The Star card's interest rate is 12.24 percent — the federal prime rate plus 4.99 percent. That's the interest rate across the board, regardless of your credit rating.

In comparison, Target and Wal-Mart have tiered interest rates that depend on the customer's creditworthiness, and their best interest rates are a little higher than the Military Star card's.

According to http://www.target.com">http://www.target.com, the Target credit card interest rate is 12.49 percent, 15.49 percent, 18.49 percent or 21.49 percent, depending on your credit qualifications.

According to http://www.walmart.com">http://www.walmart.com, the Wal-Mart credit card carries an interest rate of 12.37 percent or 18.37 percent.

Many other retailers' cards have interest rates of 21 percent or higher.

The average annual percentage rate for the standard bank card during the week of Jan. 7 was 13.42 percent; the gold card average was 11.73 percent; and the platinum card was 10.71 percent, according to http://www.bankrate.com">http://www.bankrate.com.

But when comparing cards, you shouldn't stop with the interest rate. After all, you should be trying to pay off your credit cards every month to avoid paying interest.

According to Anstey, the Military Star card outshines other retailers' cards and bank cards in several ways. For example, there are no annual fees, late fees or over-the-limit fees.

In addition, the Star card offers a deployment protection policy that lowers the interest rate to 6 percent — with the proper paperwork — for those who deploy.

Other credit cards don't necessarily reduce interest rates for those on active duty who deploy. For other cards, the bank or credit card company must reduce the interest rate to 6 percent only if your service results in an adverse change in your financial situation — and only if the debt was incurred before you entered active duty.

The Star card also offers free standard shipping on purchases, as well as special promotions and discounts, including a 10 percent discount on everything you buy the first day that you shop. Many other retail credit cards also offer these benefits.

As you review your credit card terms, look at your spending habits when choosing your card. If you're the type who usually doesn't pay off credit card purchases immediately, it's important to focus on the interest rate.

But consider other aspects, such as annual fees and rewards programs. Many retail and bank cards offer rewards programs, such as cash rebates and store discounts, based on the amount of purchases.

The Military Star card does not yet offer a rewards program, although officials have said such a program is being developed.

Bottom line: Pick the card with the terms that best fit your wallet.

Got that? You're good to go.

Questions? Comments? Contact staff writer kjowers@militarytimes.com?subject=Question from ArmyTimes.com reader">Karen Jowers at sgtshopper@militarytimes.com">sgtshopper@militarytimes.com.

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