Just when you think you know all of the tricks and traps the credit card companies can come up with, The Consumerist has been getting some tips on a new one from Chase.

The Monthly Cycle Trap

In the wake of all of the humor surrounding the new iPad, I am going to delve no further in that direction.   That said, it seems that Chase has set up a nice little trap surrounding their statement cycles, both for credit cards and mortgages statements.     The idea is that if you make a payment before your statement closing date, they count it towards your previous month, not your current statement.     Let’s say your statement closes on the 15th and your payment is due on the 8th of the next month.     If you make a payment before the 15th, they payment is credited towards the previous statement, not the next one.     This is a problem, I suppose if you try to pay a statement very early, and it doesn’t count towards that statement.     Essentially, you have about three weeks between when your statement closes, and when your payment is due.    If you pay early, it is as if you didn’t pay at all for that statement.    Of course we all know the consequences if you pay late.

Playing Devil’s Advocate

Why would you want to pay early anyways?   I suppose if you carry a balance, you might save a little interest, but in the example in The Consumerist, the cardholder makes a payment on the day after his due date.   I don’t get it.    From the bank’s standpoint, how can they know which statement you intend your payment to apply to?    It would seem that making the decision, based on the date the payment is received is the only way they could do that.

On The Other Hand…

First, there is no reason you should not be paying all of your bills electronically in this day and age. When you pay electronically, it is easy to make every payment precisely on it’s due date, so you keep your money up until the moment it’s due.     Secondly, the run around that Chase puts the cardholder through is inexcusable.     The correct response would be to credit the later statement for the early payment, and courteously explain how payments are applied to each statement.     They should also explain the matter more clearly on the bill.    All they need to do is put a reminder, next to the due date, that any payments received before a certain date are credited to the previous statement, unless you specifically indicate otherwise.

In Conclusion

You should always be aware of your statement closing date, even if it is somewhat hidden on your statement.      It is an important date for both charges and payments.    As a “deadbeat” who always pays in full and never pays credit card interest, you better believe that I will hold off on large purchases until the day after my closing date, in order to give me an additional 30 days of free financing.    It turns out that the closing date is also very important to know, if for some reason you find yourself needing to pay your bills early.

You’ve been warned.

A few weeks ago, The Consumerist printed an excerpt from a book by Bob Sullivan, “Stop Getting Ripped Off: Why Consumers Get Screwed, and How You Can Always Get a Fair Deal “.      The idea is that you keep a single card that you pay off in full every month.    That is your “clean card” as charges on it do not accrue interest, so long as they are paid in full every month.    The the other card is your “dirty card” that you use as a line of credit, and do incur some interest.

How Could This Work?

I won’t go into detail about how this strategy  actually works, it is best to just read the excerpt from The Consumerist.    My question is;  Who can benefit from this strategy?   First, I have to say that never carrying a balance and never paying interest on your credit card is ALWAYS the best strategy, period.     Unfortunately, this is not realistic for many people.    As I have always tried to explain, when you carry a balance at the end of the month, even one penny, you owe interest on all of your charges from the date of purchase.    As the credit card companies like to think of it, you are always being charged interest on everything, it is just waived if you happen to pay your balance in full and on time.    The difference is merely semantics.

The idea behind the “clean card” theory is that if you were only able to pay off 90% of your balance, you could put that on the “clean card” and the other 10% on your “dirty card”.    You would pay no interest on the 90%, only on the 10%.    I have  one problem with this theory.   If you are budgeting your life well enough that you know that you will not be able to pay off some of your credit card balance, why are you charging it in the first place?     I guess life happens and people have emergencies, but by definition, you can’t anticipate them.

On the other hand, I can think of some people would benefit from the “clean card” strategy.     Certainly if you are in debt already, but are trying to climb out, this would work.     Take however much you money know for sure that you will be able to pay at the end of the month, and charge it to your “clean card”, while leaving enough left over to start paying off your “dirty cards”.     In this way, your ongoing monthly expenditures will be interest free, while you pay off your charges that are still accruing interest.

Another scenario where this might work is where people are incurring expenses that are reimbursed by their company, such as travel.     The last thing you want is to charge your travel expenses to a “dirty card” that is incurring interest on your company expenses, as no company I know of will reimburse you for your interest.      In this case, you can get a nice, cash back or reward travel card for all of your company expenses.     You can pay the balance in full as your expense checks come in and pocket the rewards.    You might even just endorse your expense checks to your credit card company and mail them directly, taking your bank account out of the loop.   In the mean time, you can still pay off your personal, “dirty cards” as best you can.   As I have written many, many times, these cards should have the lowest interest rates possible, which are almost certainly not found with reward cards.

In Conclusion

Holding “Clean Cards” can be a useful strategy for some people.    Unfortunately, I worry that there are very small number of people who are consistently unable pay off their balances in full, yet are somehow able to budget properly between their “clean” and “dirty” cards.    Ask yourself seriously if you think you are one of those people before attempting to take advantage of this strategy.

This month’s Conde Naste Traveler features some articles on the collection of frequent flier miles.  They tie the whole thing into the theme of the recent movie Up In The Air.   In that article, they get the opinion of Gary Leff, the president of FlyerTalk on how to maximize your earning of miles and points.     There is are few people more qualified to hand out advice on frequent flier miles than Gary.   That said, let’s take a look at his recommendations:

1 Shop at e-tailers that go the extra mile(s). Evreward.com offers lists of loyalty programs and deals affiliated with major sites.

This is good advice on the face of it, but just remember, if you are ing something just for the frequent flier miles you are almost always loosing.    This makes sense only if you would have bought the item anyways, and you can’t purchase it for significantly less elsewhere.    It would also make sense if you are being reimbursed by a third party who doesn’t know or doesn’t care that the product might be available for slightly less elsewhere.

2 Use branded credit cards. By FlyerTalk consensus, the best all-purpose card is the Starwood Preferred Guest American Express, which earns points that can be applied across dozens of airlines.

Fantastic advice that I have echoed on the blog many times.

3 Earn miles to burn them. “Miles will never be worth more tomorrow than they are today,” Leff says. Don’t hoard and don’t waste them on domestic coach flights. Your goal: international business or first class.

More great advice.    Never spend years saving for an award, as the availability will go down while the price in miles or points will go up.    Maximize the value of your reward, which will always have a higher cents per mile when redeemed for international business or first class travel.

4 Think alliances, not airlines. Most major carriers allow passengers to book reward tickets on any alliance member. Consider where you want to fly and on which airline when choosing your domestic carrier.

More good stuff.    This reminds me of the time I had my parents use their Membership Rewards points to redeem miles on Japan’s All Nippon Airlines, for award seats on South African airlines.    There is a tangled web out there, but it can be leveraged by those in the know.

5 Be strategic with miles. “Start with one account and concentrate on miles there until you can redeem the reward you want,” says Leff. Then sign on with a different alliance for greater coverage.

This is great for regular business travelers, while occasional leisure travelers might only get to focus on one or two programs.

6 The best program in North America is Aeroplan. Air Canada, which participates, has the lowest threshold for elite status, accepts American Express points for reward tickets, and allows for multiple stopovers on a single ticket—you can fly around the world on your way to Hong Kong.

Aeroplan is a Star Alliance carrier, so you might want to consider accruing points on their program when flying other carriers in the alliance such as United, Continental, and US Airways.

7 The best U.S. program is Continental OnePass. Leff gives it high marks for reward tickets, the ease of booking them, and membership in the largest airline alliance.

Enough said.

8 Toughest program: Delta offers very few premium seats at sky-high prices. Next comes United, which tries to block passengers from booking seats on partner airlines in favor of its own.

I have had some real trouble with redeeming Delta awards, and the consensus on FlyerTalk is that the Delta Award booking engine on their web site is broken beyond repair.    Only an expensive call to their staff has any chance of finding reasonably “priced” award seats.   In fact, just today he tries to find some use for Delta miles in a post on his blog.

9 Your carrier is not your miles bank. You’re not stuck earning miles on whomever you happen to be flying; funnel those miles to your preferred account within the same alliance. Don’t scatter your miles.

See numbers 4 and 5

10 Once you’re addicted to miles, start planning a “mileage run.” Mileage runs are multi-layover trips to nowhere, specifically designed to rack up miles. Visit FlyerTalk’s forums to learn how to plan your own.

I suppose Conde Naste did not include enough detail due to space requirements, so they just said to see FlyerTalk.   The idea behind the “mileage run” is not to accrue miles towards an award seat, as the miles are rarely worth the cost of the ticket.    The idea is to earn status by earning qualifying miles.   Those “butt in the seat” miles flown are the only way to graduate from being a lowly peon to an exalted member of status, indicated by a plastic card in the color of some rare earth metal.     Taking a flight at the end of the year that brings you to your next level of status may earn you first class upgrades and other perks, for the next year, that are worth far more than the price of your ticket.

In Conclusion

A great list with some super advice from a real guru.