Surviving a Military Paycheck Error – How to Resolve Pay Problems and Get Through a Cash Crunch

No system is perfect. Especially complex systems managing hundreds of thousands of unique inputs and outputs on a biweekly basis. Inputs and outputs that frequently change based on dozens of different factors that can change at a moment’s notice. Of course, the system I’m referring to is the military pay system. I’m sure you guessed that by the title of this article.

Unfortunately, the military pay system isn’t perfect. Errors can and do happen. And that’s not good when people need their paychecks to pay for basic living essentials such as food, housing, transportation, utilities, etc.

Table of Contents

1. Common Military Paycheck Errors
2. What to Do When the Military Messes Up Your Paycheck
1. Resolving an Overpayment
2. Resolving an Underpayment
3. Unraveling the Impact of Paycheck Problems
1. Dip into Emergency Savings
2. Speak to Your First Sergeant or Contact Your Service Aid Society
3. Work with Your Creditors
4. Communicate with Your Landlord
5. Raise Cash – Take on Extra Work, Sell Things, etc.
6. Use a Military Bank – They Are Often Willing to Work with Military Members on Pay Issues
4. Less Attractive, But Still Viable Options
1. Tap into Your Home Equity Line of Credit
2. Credit Cards May Be an Option
5. The Worst Way to Handle a Pay Problem – Avoid at All Costs!
1. Payday Loans and Title Loans – The Worst Options
6. Plan for the Future – Take Control of Your Budget and Your Finances

Common Military Paycheck Errors

In most cases, military paycheck errors are minor and quickly fixed.

I served on active duty for 6.5 years and personally experienced several small pay issues.

For example, I received an overpayment on an advance for a TDY was one such occasion. I didn’t want the advance. However, my First Sergeant required all lower-ranking Airmen on our TDY to take the cash advance. Unfortunately, I was overpaid, then I had to write a check to pay back the government.

I had the option of having the overpayment withheld from future paychecks, but I preferred getting it over with immediately. Of course, I was also worried that having the pay withheld from future payments could cause additional pay problems.

Thankfully, no long-term damage was done. But it took a couple of hours out of my day and took me away from work.

But some problems are much worse. I know people who were underpaid, not paid at all, grossly overpaid and had their pay docked for the next several checks, etc.

Government shutdowns have also stopped military members from being paid.

These pay problems can quickly cause a lot of damage. So let’s take a look at what you can do to help survive a military paycheck problem.

What to Do When the Military Messes Up Your Paycheck

The first step is to assess the situation. What happened? Were you not paid at all? Underpaid? Overpaid?

Contact your finance department, explain the situation, and see if you can sit down with them and walk through the problem and find a solution. Many military pay problems are small and can be resolved over the phone or with a quick meeting. But if your problem is bigger, you will need to do a little more work to find a resolution.

Resolving an Overpayment

Being overpaid can be almost as bad as being underpaid because you will need to repay the excess amount of pay you received. As I previously mentioned, I was overpaid for a deployment when I was forced to take a cash advance I didn’t even want.

The solution for me was easy. I wrote a check to the US Treasury Department for the overpayment amount. The overpayment was around $400, which was not an insubstantial sum when I was an E-3 with a take-home pay of about $600 per pay period.

In other situations, you may be forced to repay more than you can write a check for in one fell swoop. In that case, your paycheck may be garnished by a certain amount each check until you have repaid the debt you now owe.

This can be a big problem if you are living paycheck to paycheck or you regularly spend your entire paycheck each month. In most cases, you can work with the finance department to spread out the overpayment over several checks. But if you were grossly overpaid, you may need to figure out a payment plan that doesn’t take away too much of your paycheck.

Resolving an Underpayment

Being underpaid is rough. You need to keep paying for your living expenses, even if your paycheck is light or if it doesn’t even show up. Not being paid is rare but not unheard of.

Non-payment for active duty members is most common when you change status (being activated, deactivated, separating from the service, receiving separation pay, or receiving an enlistment or reenlistment bonus). Non-payment for members of the Reserve Component is more common, especially when the members are coming on and off orders.

Underpayments can happen for various reasons, including being deployed, going on TDY, going through a PCS, receiving a promotion, changing status, adding dependents, change in BAH rates, becoming eligible for additional pay and bonuses, etc.

Resolving an underpayment starts with contacting your finance department, explaining the situation, and waiting for them to rectify it. Often, your payment will be resolved in one or two pay periods. But in some cases, it can take longer. Situations that may take longer are often things like bonuses, separation pay, and similar payments. 

As a member of the Air National Guard, I had a pay problem that took nine months to resolve. I changed units, and my gaining unit incorrectly marked my service as “points, no pay.” The result was that I did not get paid for three consecutive drill weekends (Jan-Mar). Even though I identified the problem early, it took several months to resolve it. I finally got paid for those drill periods in November of the same year. That was the most frustrating issue I’ve had to date with the military pay system. 

Unraveling the Impact of Paycheck Problems

Thankfully, most pay problems are small. But not all. And even small problems can quickly become big problems if they aren’t resolved quickly. And the problem with paycheck errors is the initial problem can lead to further problems, such as missing payments, adding debt, incurring financial problems, and worse. So let’s review some ways you can get through this pay problem.

Dip into Emergency Savings

Everyone should have an emergency fund. How much you should have is up to you. But it’s best to start with at least $1,000. As a rule of thumb, I recommend everyone have at least one to three months of living expenses. That will help you manage most emergencies that pop up. If you don’t have one yet, make it your resolution to start an emergency fund. Be sure to top up your emergency fund once the situation is resolved.

Speak to Your First Sergeant or Contact Your Service Aid Society

Your First Sergeant is your first line of defense and can help point you to resources on base or in the local community. This can include a financial counselor or another financial specialist.

Each branch of the service also has an aid foundation that helps its servicemembers through tough times. Here is a top-level list:

• Air Force Aid Society.
• Army Emergency Relief.
• Coast Guard Mutual Assistance.
• Navy-Marine Corps Relief Society.

Usually, these foundations will offer interest-free or low-interest loans to help you bridge the gap. Some may also offer a small cash grant or other aid.

Work with Your Creditors

If your paycheck problems cause you to run low on cash, you need to get proactive. That means contacting your lenders and creditors. Explain the situation and ask if they will be willing to work with you. Some lenders may be willing to let you skip a payment or may be willing to waive late charges or finance fees for your first missed payment. The key is keeping lines of communication open. They can’t and won’t work with you if they don’t know about the situation.

Communicate with Your Landlord

Contact your landlord if your pay issue may prevent you from making your rent payment on time. This is especially important if you are out of town on military orders. Be sure to contact your landlord and explain the situation and ask if they will be willing to work with you.

Raise Cash – Take on Extra Work, Sell Things, etc.

There are many ways to raise cash quickly, so you’ll need to be creative. This can include things such as selling items on Craigslist or eBay, having a yard sale, taking on a part-time job, doing a side job for cash, etc. Your situation will be unique, so go with what you know and what you can do.

Use a Military Bank – They Are Often Willing to Work with Military Members on Pay Issues

Military Banking is a great way to go. Many military banking institutions will work with you on things like credit card payments, auto loans, etc. if you get them on the phone and let them know what is happening.

Some of them also offer temporary loans that can help you bridge the gap. NFCU, PenFed, USAA, and other military banks are often willing to work with servicemembers in such situations.

Less Attractive, But Still Viable Options

These methods can help you bridge a short-term need for money. But they aren’t something you want to use with regularity. Use them as a band-aid, and work on paying off the loans as soon as you receive your back pay.

Tap into Your Home Equity Line of Credit

I don’t like this option very much because you would be taking out a loan against your home to pay for living expenses. The only time this is a good option is if you know you can (and will) repay the loan quickly. Otherwise, it’s better to look at other options.

The reason this can be dangerous is that a Home Equity Line of Credit, or HELOC, places a lien against your home. failing to repay your HELOC can result in foreclosure. So only use this if you can repay the loan quickly.

Credit Cards May Be an Option

Another option, though less attractive, is using credit cards. I don’t normally recommend using credit cards to pay for normal living expenses, but it’s a different story when it is for an emergency. And credit cards are almost always a better option than taking out a short-term loan from a payday lender, title loan company, or other company that offers high-interest short-term loans. If at all possible, try to pay off your credit card as soon as possible. Here are some featured military credit cards.

The Worst Way to Handle a Pay Problem – Avoid at All Costs!

There are always lenders that are looking to take advantage of those in need. Avoid the following lenders at all costs – otherwise, you will spend way to much money to fix a short-term problem.

Payday Loans and Title Loans – The Worst Options

Perhaps the worst thing you can do is get a  payday loan, title loan, or other high-interest loans. They are quick ways to digging a deeper hole and can be difficult to get out of.

Interest rates on those loans don’t appear to be too bad at first glance, but they are usually represented as a percentage for the short-term duration of the loan. So what appears to be a 20% loan is actually a 20% interest rate for a week or two. But it can be over 300% for a full year! To put that in perspective, you might borrow $1,000 and repay over $3,000. There are better options available!

Note: There are laws prohibiting offering loans to military members that exceed a set interest rate. However, many lenders use fine print to avoid these or “forget” to ask if you are in the military.

Plan for the Future – Take Control of Your Budget and Your Finances

Plan for the future. Once this situation is resolved, it’s a good idea to plan for the possibility of something like this again. It would be a good idea to use the separation pay and bonus to get current on any missed bills and then save a little in an emergency fund for a rainy day. This will help you and your family avoid any potential financial surprises.

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