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?

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  • 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.

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  • 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?

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      • satcook
      • satcook
      • 4 mths ago
      • Reported - view

      WhoMovedMyCheese look at the available bubble for your credit card. Does it equal the total due on the card??  If so then yes you can spend that $185 on medical expenses or anything else you want!

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    • WhoMovedMyCheese  Remember that in YNAB, all of your positive budget accounts are all bucketed together as one big To be Budgeted total. So, this $185 is actually cash money you can spend on anything you'd like--it's just that it's sitting in your credit card account rather than your checking account right now.

      (Imagine your credit card is simply functioning like a pre-paid debit card or checking account when it goes positive.)

      Just like any other available funds, you can move that money from the Health: Vision Expenses category to any other category from which you'll plan to spend dollars via your credit card if it clarifies things for you. :)

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    • Dela 

      I'm still stuck on stupid for this one.  Here's what I don't get

      1) The merchant refunds the $185
      2) The credit card company records this $185  *on my statement* as a credit of $185
      3) Assume my total other charges for the month come to $200
      4) When the credit card statement closes at the end of the month, the credit card company  sends me a bill for $15.  I pay the $15
      5) Up to this point, I'm fine - everything reconciles transaction wise, we're good.

      However

      A) My Vision Category for January, is still showing a positive $185 (funds available). 
      B) That 'funds available' shows through every successive month. 
      C) Its flagging $185 as available to be spent on glasses, or to recategorized...that I no longer have.  Because the credit card company already lowered my bill by that amount

      Whats the fix / right approach for this?  Seems to me it could easily destroy a budget and leave you short on bills, if this money was moved to another category.

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      • nolesrule
      • Been waiting 5 years for the Stealing From the Future fix...
      • nolesrule
      • 4 mths ago
      • Reported - view

      WhoMovedMyCheese 

      WhoMovedMyCheese said:
      C) Its flagging $185 as available to be spent on glasses, or to recategorized...that I no longer have.  Because the credit card company already lowered my bill by that amount

       You have it precisely because the CC company lowered your bill by the amount of the return. It went back to that category because that's how the return was categorized. You owe the CC less than before the return, so now that cash no longer needs to be used to pay the CC. You can move it elsewhere if you don't need it in the category.

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    • nolesrule Thank you - I think I may get this now:  Is this corect?

      - the credit lowered my bill by $185, so
      - even though that transaction in Vision is now a wash (I spent $185, I was refunded $185)
      - the budgeted YNAB spend for the other charges  on that statement now exceeds the total amount due by $185.

      Therefore, the $185 is real cash that can be reallocated from the Vision category

      here's my follow on - if I move that excess out of the Vision category, does the offset disappear (ie, does this mess up the reporting on what was actually spent in Vision?)

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    • WhoMovedMyCheese 

      I tried to quote your last question, but the answer to 'Will moving the $185 mess things up?' is

      Nope! You've got it!

      Like 1
    • Move Light Sound Life Great!  Thanks to all for the help here.  This was painful.

      Like 1
  • This is probably not the way to do this but I just mark it as to be budgeted since it's money I got back.

    You could just leave it in that category and if you need it somewhere else just remove some of the money from there.

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      • Ceeses
      • Ceeses
      • 4 mths ago
      • Reported - view

      VoltaicShock If you do so, then the money doesn't appear in the To Be Budgeted category if the CC account is still negative. You then need to move money out of the CC category (since you received some money in the CC account, there is now less debt to pay back so you need less money reserved in the category to pay the debt). It works but might be less visible than categorising to the initial category. And worst, your reports are wrong: they will say you spent $185 on glasses when in fact you spent $0.

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    • Ceeses, You are correct, and this does work for me and might not for everyone else.  I am still not a fan of how credit cards work in YNAB (maybe I just don't fully understand them).

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  • 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.

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