Military allotments can significantly influence a service member's credit report or profile. When utilized effectively, allotments act as a financial stabilizer, ensuring that debts and obligations are addressed in a timely manner.
Military allotments allow service members to automatically divide their paychecks and send the money to certain recipients or accounts. Think of it as setting up automatic payments from your paycheck to cover certain expenses or put in a savings account.
There are two types of military allotments: Discretionary and non-discretionary. Service members are limited to six discretionary allotments per month and have no limit for non-discretionary allotments as long as total allotments are less than 15 per month.
It’s important to know allotments cannot be used to purchase, lease or rent personal property. This includes your car payment or rental furniture.
Service members can choose to give a monthly allotment to a spouse or whomever, but the money is deducted from their own pay. It does not come from the Department of the Army or Department of Defense.
A discretionary allotment is voluntary and set up by a service member. These allotments can be stopped, started or adjusted by the service member at any time. It’s important to understand that you cannot have more than six discretionary allotments per month.
Common discretionary allotments include:
Many who are deployed in war zones use discretionary allotments to deposit money into the Department of Defense Savings Deposit Program.
Non-discretionary allotments may be involuntary or voluntary but cannot be stopped or started at any time. There is no limit on the number of non-discretionary allotments, but they are limited to certain scenarios.
Military allotments do have some restrictions that service members should be aware of.
If you have any questions about allotment restrictions, visit your local pay office or officially refer your question to DFAS.
Allotments are risky when payment amounts fluctuate. Too many people get hit with late payments when they set up allotments for something like a credit card. One large purchase can increase your minimum payment, and even though the payment may only go up by 10 dollars, paying too little is considered late and can affect your credit score.
Without your notice, you can get stuck with late notices. Even though you are making payments, the payments aren’t sufficient and end up categorized as late or missed. A number of these in a row can really hurt your credit score.
Allotments are a great option for recurring expenses that will always be the same amount. Some examples include healthcare premiums, retirement contributions or mortgage payments. You can be sure that these expenses will remain constant, and it's always an option to increase the amount or make a one-time additional payment.
Setting up automatic payments through individual companies for expenses like utilities and phone bills may be beneficial. That way, the correct amount will be taken out every month, no matter what.
Military allotments may be set up through myPay or by using DD Form 2558. Ensure you know your account numbers, addresses, routing numbers and other pay-related information to make the process easier.
When setting up an allotment through myPay, there is a “no later than” date listed before and after you set up the allotment, letting you know whether the allotment will start this month or next month. Allotments are deducted from multiple pay periods, so half comes out with your first month’s Leave and Earnings Statement (LES) and the other half is paid for your second military paycheck that month.
Watch your LES carefully until you see that an allotment has been successfully started. Do not assume that any bill is being paid by a new allotment until you have verified that the payment is received.