Understanding Military Allotments: What You Can (and Can’t) Use Them For

Military allotments are a helpful financial tool that allow servicemembers to automatically set aside portions of their pay for specific purposes. From supporting family to saving for the future, allotments can simplify financial management, especially during deployments or busy duty assignments. While recent policy changes have limited certain uses, allotments remain a valuable part of many military members’ financial plans.

What Is a Military Allotment?

A military allotment is a system that lets servicemembers designate part of their pay to be automatically sent to a specific recipient or purpose. This could be a family member, a loan servicer, or a bank account. Allotments are especially useful for ensuring important expenses are covered on time, even when a servicemember is away from home or has limited access to financial tools.

What Can Allotments Be Used For?

Despite the changes that removed some allotment options, servicemembers still have a wide range of approved uses. According to the DoD website, “Allotments still can be used for savings account deposits, investments, to support dependents, pay insurance premiums, mortgages, rents, make Combined Federal Campaign contributions, and U.S. government debt repayments.”

In practice, servicemembers can still use allotments for:

• Sending money to family members
• Paying for housing (rent or mortgage)
• Making insurance premium payments
• Depositing into savings or retirement accounts
• Supporting charitable contributions
• Repaying federal loans or government debts

Example: A servicemember earning $2,000 per paycheck might set up an allotment of $300 to be sent directly to their spouse’s account, $200 toward a savings account, and $500 to automatically pay rent. These allotments total $1,000, so only $1,000 would be deposited into the servicemember’s main bank account after the allotments are processed.

What Allotments Can’t Be Used For

Since January 1, 2015, active duty servicemembers are no longer allowed to set up new allotments for the purchase of personal property. This includes:

• Vehicles (cars, motorcycles, boats)
• Household goods (furniture, washers, dryers, refrigerators)
• Electronics (laptops, tablets, TVs, phones)
• Other tangible, moveable consumer items

Servicemembers must also now certify under the Uniform Code of Military Justice (UCMJ) that any new allotment is not being used to buy, lease, or rent personal property.

Example: An active duty servicemember wants to buy a $1,200 laptop and the retailer offers to split the payment into $200 per month for 6 months using an allotment. Under the current rules, that allotment wouldn’t be allowed, even if the servicemember agrees to the terms, because it involves buying a tangible personal item with an allotment, which is now prohibited.

Important Note: This policy change does not apply to retirees, National Guard members, or DoD civilians. Additionally, allotments created prior to January 1, 2015, were grandfathered in and remain active.

Why the Policy Changed

This update was implemented to help protect servicemembers from being taken advantage of by aggressive or dishonest lenders. In the past, some retailers would steer military members into expensive financing deals by offering to help set up allotments that paid them directly.

I’ve seen some examples of this first-hand, as I knew a young servicemember (E-2) who was talked into buying a car with an interest rate over 19%. The dealership even filled out the allotment paperwork for him.

While some responsibility falls on individuals to make smart financial choices, the DoD recognized that the allotment system could be manipulated. By removing the option to use allotments for personal property purchases, the department added a layer of protection without eliminating the benefits of the system altogether.

Are Allotments Still Useful?

Yes, allotments remain a very practical option for many servicemembers. They’re still commonly used to send money to family members during deployments, make regular mortgage or rent payments, contribute to savings or investments, or ensure that child support or alimony payments go out on time. While most banks today offer online tools and automated payments, not all do, and allotments can be a reliable alternative.

Here are some recommended military banks if your bank doesn’t offer these features.

Final Thoughts

The new rules help make it harder for unethical lenders to misuse the allotment system, but they don’t solve every financial challenge servicemembers face. Real, lasting protection will come through better financial education. And that is something that unfortunately, is lacking in our school systems, and in the military. Until that becomes a priority, some servicemembers will continue to struggle with financial decisions that can have lasting consequences.

Meet the Author

Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Tennessee Air...

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