Banks Team With Defense CUs To Challenge JP Morgan’s On-Base Card

ALEXANDRIA, Va. – The Association of Military Banks of America has joined defense credit unions in asking the Department of Defense to terminate an on-base credit card program awarded to JP Morgan Chase.

The banks and credit unions claim the Military Star Rewards MasterCard, issued by the Army and Air Force Exchange Services, violates Pentagon policies on financial services, including the “one bank, one credit union” rule.

The groups also claim the new card violates the Pentagon’s rule barring DoD operations, such as Exchange Services, from providing financial services. “The program amounts to providing financial services,” said Fred Becker, president of NAFCU, which has lodged a complaint with the Pentagon on behalf of defense credit unions.

The stakes in the dispute are huge, as AAFES operates more than 3,100 retail facilities on bases around the globe and reported sales of $8.7 billion last year.

Pentagon officials told The Credit Union Journal the new card program does not violate DoD rules. “Since 1987 AAFES has offered both an Affinity MasterCard and Military Star Card. AAFES is simply combining these lines of credits into one simple, convenient piece of plastic,” Lt. Col. William Thurmond said in an e-mail message.

AAFES, which operates post exchanges (PXs) on Army and Air Force Bases, announced the new rewards card last month. The card allows customers to accrue points for money spent. But, unlike AAFES’s Military Star Card, which can only be used at exchange stores, the new card is a commercial MasterCard that can be used anywhere.

NAFCU’s Becker said the issuance of the card and related on-base solicitations effectively adds a third financial institution to base services in direct violation of regulations.