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Even in the best of times, defense credit unions must stand ready to help their members cope with adversity. This takes many forms when it comes to military members' finances.

"You're not going to get rich in the military," points out Randy Smith, president/CEO of $2 billion asset Randolph-Brooks Federal Credit Union, serving U.S. Air Force members near San Antonio. "The military has no stock options. You're not going to build up equity in your house [due to moving every few years]. Your spouse doesn't have the opportunity to build up tenure in a job.... [Military personnel] have all these things working against them. So we try to make their financial lives as easy as we possibly can."

In addition, defense credit unions do their best to steer military people away from the financial traps awaiting them at every turn. Most are young, transient, low paid, and inexperienced in managing finances and credit. They're easy prey for the pawn shops, payday lenders, rent-to-own stores, and high-rate used-car dealers that hover outside the gates of military installations. Defense credit unions offer members better options.

Besides helping members deal with their problems, defense credit unions face a few challenges of their own, according to Arty Arteaga, president of the Defense Credit Union Council, Washington, D.C. The council's members include some 270 credit unions whose memberships consist at least partially of military personnel.

These days, it's difficult for defense credit unions to plan for their future, Arteaga says. "We're in a very fluid environment."

One challenge on the horizon is "base realignment and closure," or BRAC, which would close several bases or shift personnel from one base to another. BRAC is to take effect in 2005, although recent attempts in Congress might delay it until 2007. Whatever the date, credit unions on affected bases may have to move, or even close.

Another initiative that will have an impact is the Department of Defense (DOD) "transformation," which aims to reconfigure armed services from a cold-war to an expeditionary force. Some overseas bases may relocate from countries where they're no longer as heavily needed, such as in Germany, to other foreign countries or back to the states. Again, credit unions serving designated overseas bases will need to move or close. But for now, the DOD transformation is on hold because of the Iraq war.

On a brighter note, one trend Arteaga notes in recent years is an upswing in DOD's awareness of the need to better equip military personnel to handle their finances. Toward that end, DOD launched an educational campaign last year, in which the council is a partner.

"Now that the executive leadership at the Department of Defense has jumped on the bandwagon," Arteaga notes, "I think we'll see improvement in financial readiness among the troops. But having said that, shortly after we launched the readiness campaign, Operation Iraqi Freedom broke out. It's difficult to promote financial readiness during these turbulent times," when commanders have much else on their minds.

Wartime worries

For people in the military, war means massive deployments, family separations, and exacerbated emotional and financial stresses. Defense credit unions help their members through it all.

For instance, $460 million asset Marine Federal Credit Union, Jacksonville, N.C., has held countless predeployment sessions in the past year-plus. From February through midsummer 2003, roughly 25,000 troops deployed to Iraq from Marine Corps Base-Camp Lejeune and Marine Corps Air Station-New River, both served by Marine Federal. Another round of deployments likely will occur later this summer. The credit union helps members prepare financially.

In the predeployment sessions, "we cover the importance of direct deposit," says President/CEO Craig Chamberlin, "set up bill-pay services, inform them they can manage their accounts from overseas if they have access to a computer, help them with powers of attorney.... The list goes on and on."

Credit union staff and three retired Marine sergeants major conduct the sessions. They're also available for financial counseling for family members left behind, who may be unaccustomed to handling family finances and may struggle with added expenses, such as for child care, while their spouse is away.

Chamberlin looks out for his staff, too, in these times. When 25,000 Marines and sailors leave town, business slows in Jacksonville, as it does at Marine Federal, where 95% of members are military. Nearly that high a proportion of the credit union's staff are military spouses. "The last thing they need to worry about now is their jobs," Chamberlin says. "I have given my word to our employees that there will be no layoffs."

While overseas with few chances to spend their pay, service members often accumulate funds in their accounts, especially if they're single with no dependents back home. Chamberlin sees many members return home and head to the car lots.

Here again, Marine Federal safeguards members' interests, thanks in part to a strong indirect lending program. "We have great relationships with dealers," Chamberlin says, "and we go to great pains to make sure that young Marines and sailors aren't overfinancing their cars.

"A dealer may want $20,000 for a 2003 Mustang, and we know the vehicle isn't worth more than $17,000," Chamberlin continues. "We won't finance for more than that. Generally, the dealers come down to the number we set."

The urge to splurge upon returning home, however, can lead to deep financial trouble, especially for service members with families. That's one of the messages $21.5 billion Navy Federal Credit Union, Vienna, Va., weaves into its briefing sessions for returning sailors and Marines. These sessions might occur stateside, in Europe en route to the states, or even on an aircraft carrier a few days away from port.

Bill Earner, Navy Federal's chief operating officer, points out that returning spouses often are eager to resume their role as the financial head of household. But they forget they've fallen out of touch with family finances.

"They can get themselves into debt quickly," Earner says, "by not recognizing the rhythm of their payments and by wanting to buy something big because they're home. They don't recognize the family expenses have gone on, even though they were overseas not spending much at all."

Beyond the pre- or postdeployment sessions, defense credit unions do whatever it takes to assist individual deployed members. For example, says Randolph-Brooks Federal's Smith, that might entail reducing or postponing loan payments, or retrieving a safe deposit box in the middle of the night to give a deployed member access to important papers. Says Smith, "We'll jump through hoops to make things happen."

Continuing needs

Military members face financial hurdles anytime, not only during war. Defense credit unions help them make ends meet by offering good deals on financial products and services.

Navy Federal has a special auto loan program for members with shaky credit, or little or no credit history, as is common among young enlisted service members. They'll pay two percentage points higher than the standard 48-month new- or used-auto loan rate. But after two years of successfully meeting payments, their rate drops to the standard level. "If we didn't offer this," Earner notes, "they'd go out to the dealers outside the base gates and get a loan at 20%."

Generally, however, "we try not to lend money at higher rates to our junior people," Earner adds. "We provide them a good rate. If we just did a risk-based profile, they might not qualify for that rate. But we give it to them."

At $870 million asset Service Credit Union, Portsmouth, N.H., with 14 branches in Germany, military members are eligible for special consumer loan discounts. "They'll get 35 basis points [bp] off a loan, so long as they have direct deposit and a checking account with us," explains Ray Springsteen, vice president of member services.

Members who are deployed get an even better deal, with a loan discount of 75 bp. The motive behind the Deployment Program, as it's called, is that "we'll help them and their family members," Springsteen explains, "at a time when they're away from home for a long time." He adds that military members still have access to the special deployment rate for 30 days after returning to their base.

On the deposit side, Service Credit Union launched the Star Program to promote savings among military members, who make up about two-thirds of total membership. They can open a certificate for $250, instead of the usual $1,000 minimum, making it easier to start the savings habit even though earning low pay.