The Department of Defense Savings Deposit Program is available to those serving in designated combat zones. Military members deployed in combat zones, qualified hazardous duty areas, or certain contingency operations may deposit all or part of their unallotted pay into a Department of Defense savings account up to $10,000 during a single deployment and earn a 10 percent interest rate.
The savings program was first used during the Vietnam conflict, reopened for Desert Storm troops in 1991, and extended to troops in Bosnia in 1996. Ever since it has provided a way for active duty personnel to save money. Don't confuse this with the Thrift Savings Plan (TSP), which is available to everyone in federal service and is not based on military deployments.
Savings Deposit Program Interest
Interest accrues on the account at an annual rate of 10 percent, per Executive Order 11298. You get this rate while you are in the combat zone and for up to 90 days after leaving the combat zone. The interest compounds quarterly (based on the calendar year). The interest rate is far more generous than interest in traditional savings accounts and outperforms many different forms of investments.
The nitty-gritty is that you begin to earn interest on money deposited on or before the tenth of the month. If you make a deposit after the tenth of the month, it doesn't start accruing interest until the next month. When you make a withdrawal after deployment, the interest stops on the date of the request. If that date isn't the last day of a month, the interest is only accrued through the last day of the preceding month.
The accrued interest on the Savings Deposit Program is taxable, although your federal income earned while you are in a hazardous duty zone is tax-free.
Eligibility for the Savings Deposit Program
To enroll, you must be receiving Hostile Fire/Imminent Danger Pay (HFP/IDP) and serving in a designated combat zone or in direct support of a combat zone for more than 30 consecutive days or for at least one day for each of three consecutive months. Eligibility for SDP stops on the day of departure from the combat zone, and no further deposits can be made, but interest continues to accrue for the next 90 days.
Making a Deposit to the Savings Deposit Program
Service members use the program by making deposits by contacting any military finance office in theater. You can begin making deposits after 30 consecutive days in the designated area. You cannot longer make deposits after your day of departure from the theater. You can make deposits by cash, personal check, traveler’s check, money order or allotment if you are active duty, but if you are a reservist you can't deposit via allotment or traveler's check.
You can make deposits in five-dollar increments. The amount you deposit is limited to your net monthly pay. This can include special pays and bonuses. You can make more than one deposit per month so long as you don't exceed your net monthly pay. You can only deposit a total of $10,000 per deployment. You can discontinue making deposits at any time.
You will automatically receive transfer of all of the funds via direct deposit 120 days after leaving the combat zone as the account will be closed. It is typical to wait for this transfer, but early withdrawals are possible if you meet certain guidelines and requirements.
After return from deployment but before the end of the 120-day period, you can submit an automated request through your myPay account. Once you have deposited $10,000, you may withdraw the funds over $10,000 quarterly (normally, this would be just the interest on the account). Your commanding officer can approve emergency withdrawals for the health and welfare of your family.