Closing the Loop On Credit Card Return Credit
This scenario has been bugging me for most of the past year, and I still do not have a straightforward resolution. It always becomes more acute around this time of year, when purchases made in December, may come back as next year credit card credits. Anyway...
1) I bought a pair of eyeglasses for $185, in December, on a credit card The spend was allocated to a category called Heath: Vision Expenses, and recorded as spend in the YNAB credit card account.
2) Received the eyeglasses, hated them, returned them.
3) The credit appeared in January on my credit card. I allocated that back to the Health: Vision category, as a credit in the YNAB credit card account
4) So now, I have a expense on my card, which was paid for, in December, ultimately as a cash outlay (when I paid my credit card statement off, with a transfer from my bank). So, that's reconciled
5) The credit has me stumped. Leaving it as as a credit to Health: Vision expenses - that doesn't work. There isn't $185 just sitting in that budget category, that I can spend a few months from now, or allocate back to To Be Budgeted; because the CC company will simply deduct that amount, from what ever I owe.
How are returns handled best?
1. It may be helpful to think of your payment as paying off debt, not particular purchases.
2. Yes, there's really $185 of cash in the category. You see, there was already some money reserved for your next payment in the CC Payment category. With the return, YNAB moved $185 of that cash to the Vision category. (You didn't need as large of a payment in light of the return credit, right?)
You handled the return exactly right -- categorize the inflow back to the same category as the outflow.
Thanks for the fast response. What I don't understand is how that results in my having cash in the category to spend
I paid the December CC bill before the refund came in, during January. So that money left the building :)
Now, when I pay my January bill - there's a credit of $185. But its not for any January spend. Its for December spend. And its showing as a positive balance (Amount Available) in my Feb. budget line for Vision. (it also shows as available for March, April, May.
So, it *looks* like, in my budget, I have this $185 surplus for this category as available into the future. Except, the CC company has already applied that credit to my January bill. Its not cash in hand to spend in the future- but it looks like it is.
How do you avoid a situation where you look at your cash available, and don't think you have a bigger buffer on hand then you do?
Another way to see things. Imagine, you buy glasses and pay for them on CC and pay your CC statement balance. Then you continue spending on the CC and reserving the money to pay your debt on that CC via the CC payment category.
Then your aunt decides to gift you some money ($200) and somehow transfers it to your CC (let's leave out the how she would do that out). You categorise this transfer to TBB. This brings down your debt on your CC! So you need to reserve less of your cash (in your other accounts) to pay down the debt. And you can effectively move $200 from the CC payment category to whatever other category. You don't have more cash, you simply have less debt to pay off.
It's the same here: the reimbursement reduces the debt you owe. So you may not have more cash on hand but you have less debt to pay back, so you can recategorise the money that was reserved to pay the debt to something else. Because you have rightly categorised the reimbursement to the initial category, this cash, which newly lost its purpose, appears in that category and not as excess in the CC payment category.