Goooooooooood morning my travel hacking friends. I’m finally getting some much-needed air time today. I’m actually flying to Detroit to take care of some travel hacking business at the U.S. - Canada border…
But I’m not going to tell you why just yet. 😉
Instead, let’s talk about some misconceptions about credit cards and one last Valentine’s deal for the road:
💳 Credit card statements, explained
🥰 Valentine’s Day ain’t over yet… at least according to this airline
🐈 My cat loves credit cards, too
💳 Credit card statements, explained
A friend of mine recently asked me a question:
After about an hour of ranting about credit cards and evangelizing the gospel of travel hacking, I realized that there are quite a few misconceptions about how credit card statements, interest, utilization, etc., work.
So let’s have a chat. Why don’t you come take a seat, young Padawan?
And if you’re already pretty well-versed in this stuff, give it a read anyway, I have some tips that might still help you.
First, let’s define some terms (you WILL be quizzed on this):
Statement Balance: The amount of money you owe on your card at the time of your Statement Date
Utilization: your Statement Balance as a percentage of your credit limit
Statement Date: the once-monthly date that ends each monthly spending period for a card.
Payment Due Date: The date by which you have to pay your statement balance without incurring any interest.
So let’s talk about Utilization first.
If you have a credit limit of $1,000 and your Statement Balance is $300, your Utilization for the month will be 30%.
You may have heard that to not hurt your credit score, you want your Utilization to be under 30%. But in reality, you want your balance to be more in the 2-5% range to give your score the most significant possible boost.
This shows the credit bureaus that you can manage your credit responsibly and that even though you have a certain amount of credit available, you don’t want to/need to use every last bit of it.
So back to the question at hand:
This is where most people misconstrue things. You see, your Statement Balance is different from the amount of money you spend during the month.
I know that sounds confusing… hear me out.
Just because your Statement Balance should end at $20 doesn’t mean you can’t spend more than that. It just means that before your statement closes, you want to PRE-pay the correct amount to manufacture the ideal balance.
Let’s take an example of a card with the following parameters:
Let’s say it’s the 25th of the month and your statement is closing in three days or so. Your current balance is $4,100, putting you at an 82% Utilization… which is bad.
Remember, your Utilization for the month is only determined by your balance at the time of the Statement Date, which isn’t until the 28th.
So all you need to do is make a prepayment of $4,000 in the next few days. This way, your Utilization by the time your Statement Date comes will only be $100, or 2%… which is good.
Now this brings us to the next misconception, which is:
Here is the answer:
Your Statement Date and Payment Due Date are two different dates.
As long as you pay your Statement Balance by the Payment Due Date, you won’t incur any interest.
The Payment Due Date generally comes a few weeks after the Statement Date, giving you plenty of time to pay your bill without racking up unnecessary interest charges. In the example above, the Payment Due Date is March 15th, meaning you have two full weeks to pay your balance without any interest.
Here is an example of a statement from one of my own cards, showing where you can find each piece of information.
You gotta buy me dinner first if you want to see the blurred-out info…
One way to ensure your card is paid on time is to set up automatic payments, which most card issuers allow.
As a side note, prepaying your card before the Statement Date in order to get a 0% Utilization won’t do you any favors. In the eyes of the banks and credit bureaus, this tells them that you aren’t using your card or credit at all.
It’s definitely better than having a high Utilization, but not as good as keeping a low one to show that you’re both using your credit and using it responsibly.
I know this sounds tedious, especially if you juggle multiple credit cards...
But it’s essential to take this stuff seriously and ensure you understand how the system works. The rewards you earn won’t be nearly as meaningful if you destroy your credit while earning them.
It’s precisely why I have a detailed credit card spreadsheet that tells me things like ideal Utilization ranges, Statement Balance history, the value of my rewards, and more to help me manage my many cards.
Do you want me to give you access to Mike's Travel Credit Card Management Spreadsheet (trademark pending)?
Only Email Recipients can participate in polls.
I don’t know if I should be telling you this, but in the near future, you might be able to get your paws on that exact spreadsheet… I guess you’ll need to keep reading every day to find out how. 😉
🥰 V-Day ain’t over yet… at least according to this airline
Valentine’s Day is over for most people… but not travel hackers.
That’s because Aegean Airlines, the flag carrier of Greece, has launched a flash sale to buy two tickets for the price of one. But it ends today, so I’ll give it to you straight:
Buy two tickets for the price of one
Sale is valid TODAY only
Valid for flights until March 31st, 2023
You must use promo code BEMYVALENTINE
Valid for all destinations in Aegean’s network
So this isn’t something that most people will be able to take advantage of on short notice… but a “buy one get one” deal is never something you should overlook.
As I’ve mentioned in the past, Aegean is great for not only trips to the idyllic destinations in Greece, but also for transiting between Western Europe and places like North Africa, Eastern Europe, and the Middle East.
One great way for non-Europeans to take advantage of this deal is to position themselves somewhere in Western Europe and use this sale to get to their final destination in order to save some cash.
Europeans, on the other hand, will have a much easier time finding a good use for this promotion. If nothing else, maybe take your Valentine on a quick hop to Santorini for the weekend.
🐈 My cat loves credit cards, too
I’ve talked your ear off today, so I’ll leave you with this photo to end the day.
I got a new credit card the other day and my cat seemed to like that “new credit card” smell (don’t we all), so I let her snuggle with it for a while. It was very cute. That’s all.
Her name is Tilly, by the way
That’s all for today, friendos. I hope you didn’t mind the lecture on credit cards and statements. I know a lot of people either don’t open cards because of misunderstandings on the topic or they get into trouble for the same reason.
Did you learn something new in today’s newsletter? Do you want to see more pictures of my cat Tilly? Let me know by replying to this email or reaching out on social media.
Have a wonderful day ❤️