credit card refund on balance already paid

Last year we booked an airbnb for a trip this month. Due to Covid19, we had to cancel and now have a refund on our credit card.

I have been searching how to account for this and have been having a hard time figuring it out.

Part of my concern is this credit needs to be paid back to several people who were sharing the airbnb with us. I figure I use this credit in places I would normally be spending my income, and pay them instead of the credit card, but I cannot figure out how to get it to reflect properly in YNAB.

What steps do I take so my accounting is accurate? Thank you! 

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  • The main issue is you no longer have that cash. It's was used to pay down debt. The refund also paid down even more debt, so good news is you have 2x the debt reduction you were planning. The bad news is you will need to come up with your own cash to pay back your friends. Most people would probably use the funds now in the Vacation category.

    The particulars from there depend on how you brought in your friend's money (e.g., separate reimbursement category? inflow to Vacation?). You'd need to shift money to the category used to inflow their money. Then categorize the check/venmo/whatever to them to that category as well.

    Do note that it's not mandatory that you pick on the vacation category. I'd actually suggest you reallocate from the lowest priority category, which may or may not be Vacation.

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  • Another option is to effectively "undo" the second debt payment by reallocating the same amount from the CC Payment category.

    In fact, in the case this card had paid-in-full status before the refund, this is exactly what you should do. The CC Payment category will now have too much money reserved (more than the account balance), so use that to pay back your friends. Move it to whatever category used to inflow their funds originally and then categorize their payments to the same.

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  • Hey all,

    My situation is similar.  I purchased an airline ticket prior to lockdown, and the airline has (3 months later!) indicated to me that they'd refund my ticket in full.  I should get that this month.

    I pay off my credit card in full every month, so I suspect I'll have a hefty credit attached to my card soon.

    I only JUST started using YNAB last week so I have nothing to budget this to.  I'm a bit confused as to what I do in this situation.  Do I put the refund towards a budget?  Or do I keep it as "to be budgeted"?  I feel like putting it towards TBB is wrong but these threads all say it may be the right way?  Am I missing something?


    • mfh5001 Categorize the inflow to the same category as the original outflow.

      If the account balance goes positive, funds will be added to TBB and the CC Payment category will be red/negative. Use those new funds to fix the category.

      If the account doesn't go positive but the payment category is negative, you're going to need to reallocate in order to cover the additional debt reduction. That debt reduction was 2x what you intended (your original payment as well as the refund). FYI, this is less likely to happen if you do NOT pay the entire account balance to $0. By paying only the statement balance on or near the due date, there are typically funds left over in the Payment category that will help absorb the reduction caused by the refund.

      Ideally they would issue the refund shortly before you make your CC payment, since the payment category can also more easily absorb the reduction.

      Hopefully  it's clear the Payment category should be reduced. (Spending increases it, so...)

      • mfh5001
      • mfh5001
      • 1 yr ago
      • Reported - view

      dakinemaui Normally I'd agree with categorising the inflow the same as the outflow, but the outflow was made in February, long before I ever heard of YNAB.  For the purpose of this exercise, it's almost "free money" since I have nothing to reconcile it against

      No doubt that, to your point, they'll possibly make the payment back to me right before the CC payment is due.  If this is the case, it'll effectively pay for the whole credit card payment, and then some.

      Let's use real numbers, making the assumptions that I get this back at the end of May prior to the statement balance being due, and that I don't spend any more on my credit card for the rest of the month.

      Current Visa balance:  $600 (which I fully have budgeted from May expenses and therefore will pay in full)

      Credit card refund on flight:  $800

      Balance:  -$200 (i.e. $200 TBB).

      The questions here are:

      1) Do I put $200 towards another category?

      2) Do I put the full $800 towards another category? 

      3) Should I only spend on the credit card in this instance?  I feel like if I keep any portion of it as TBB then it HAS to be spend on CC?

      4) Am I overthinking?  (Possibly)

    • mfh5001 said:
      the outflow was made in February, long before I ever heard of YNAB

      Then the original category is TBB. That purchase is wrapped up in the starting balance.

      And yes, categorizing as TBB will cause the budget to act different than I originally described. You can simulate this right now if you like, just to see how things work. (Undo things when you're satisfied.) You'll find the account balances are as you indicate (although you got the signs backwards from YNAB's perspective, but I'm pretty sure you understand what's going on). In the budget, however, two observations: a) the CC Payment category will remain unchanged at +600 and b) TBB will be +200 (assuming it was $0 before you enter the refund transaction).

      Having $600 reserved to pay debt when you don't even have any CC debt is obviously not needed, so zero out the Available in the CC Payment category (there's a Quick Budget button for that), making TBB = $800. (a) solved.

      Then you should budget TBB to $0 anywhere you like. (b) solved.

      While the CC has a positive (credit) balance, it is effectively a debit card on a second "checking" account. Your next purchase (or few purchases) do not have to be paid back, so that spending is really cash spending. This is exactly like your normal checking account, and the CC Payment category will not move from $0 until the CC account goes negative. You might prioritize use of the CC for budgeted purchases where possible, just because it's not accepted everywhere.

      If this last bit about "cash spending" doesn't sit quite right with you mentally, an alternative is to have the CC mail you a check which you can deposit into your checking account.

      • mfh5001
      • mfh5001
      • 1 yr ago
      • Reported - view

      dakinemaui Thanks for the response.  I definitely (conceptually) get what you're saying.  I think my brain is thinking the same thing, in terms of zeroing out the CC payment category...thus making my ACTUAL TBB $800.  Given that I already budgeted for $600 to be spent anyway, it's technically not like it's paying down any'd be (to your point) the same as them sending me a check for $800 and I can spend as I wish.

      I assume I can just credit that $800 to any category then (or should it be to the categories where I used my card?)'d be as if I returned the $600 in groceries I already spent this month back to the store and I now can re-spend on that category, as an example...

    • mfh5001 Budget that $800 anywhere you like. The only time it would be an issue is if you spent all your other cash in the entire budget, since that $600 really is on the CC which cannot be used everywhere. If your budget is that tight, you should do something different. However, if you're not likely to burn all your real cash, treating the CC credit balance as cash is the easiest thing to do.

      Generally speaking, how you pay is a separate consideration from what you buy. Categories answer, "Can I afford this?" and account balances answer, "Can I pay with this account?".

  • I was wondering the same thing yesterday, and I found this link.

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