Credit card interest more than minimum payment - how to enter this in YNAB
Working through the Dave Ramsey debt snowball, so all credit cards are set to minimum payments each month apart from the one priority card.
If a credit card has higher interest charges in the month than the minimum payment, how do you account for this in YNAB. If I enter the interest as a spend, then it needs the money from my budget to cover this, and it just isn't available.
I just worked through this. YNAB is designed to have you pay the interest plus the monthly payment plus new spending each month. If you can’t pay the interest and don’t want the negative, I would decrease your credit card payment line and put that all in interest. (So show your $100 minimum payment (whatever amount) as all interest). You will still have negative if the interest is higher then the payment, and all you can do is leave it as over spending or try to find some money out of a line that has money left at the end of the month.
The key is to understand how YNAB thinks about credit cards.
If you're working with a card that is carrying debt (and hopefully not adding current spending to the card, because that is another layer of complexity, not impossible, but an added complexity), and you are only applying the minimum payment to it, and interest is the only charge to the card, then the easiest way to do it is to budget that minimum payment to the interest category, rather than budgeting the minimum payment to the credit card itself. That will help prevent the interest from showing up as over spent.
YNAB is going to look to each category to find the funds to apply to a credit card, if there are no funds in the category then it will show as over spent, even if you applied funds directly to the card itself.
It doesn't really matter which way you do it - you're still paying the same amount on the card, and the card balance will still match up correctly. It just depends on whether or not you want an over spent number in your budget somewhere.
Ideally - you would budget enough to cover the interest in the interest category, and then apply whatever amount you'd like to pay towards the actual debt itself directly to the credit card category.
I am not sure that I would follow Dave's advice strictly if it was ultimately costing me money because the minimum payment does not cover the interest charges for the card. But that is also assuming that there is enough coming into the budget to at least cover the interest on the card completely. I have had months and months in a row when I couldn't cover the interest itself, so I understand the struggle of having to prioritize in those situations. It does get better eventually.