Credit card showing as “overspent” after payment

I know this is a somewhat common question asked here, as I’ve done my research. However, from that research, it looks like my situation might be a bit unique. 

I think I have a good understanding of how YNAB handles credit cards. This is my first month using YNAB, and the starting balance was budgeted for. No budget categories other than this credit card are showing as overspent. Most still have amounts available as the month isn’t quite over yet. I’m also a professional accountant, so the double entry method makes perfect sense to me. I also fully understand the concept of assigning every dollar a job, but I always leave a bit of a buffer just in case so there is a positive To Be Budgeted amount that I will assign right before my next paycheck. All of my account balances on the Accounts tab agree to my bank account balances.

The Issue

There were purchases made this month that we did not want to immediately pay off, so to avoid showing my entire budget as overspent I budgeted a negative amount in the credit card category, as we still technically had those funds in our checking account. 

So today, I make a large payment to the card that doesn’t completely pay down the balance on the card. And now YNAB is showing a fat red number in the credit card available column. If I try to budget for that red amount, as I have seen suggested, then my entire budget shows as underfunded, which isn’t true as I still have that buffer to budget for. How do I fix this?

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  • The amount in your CC payment category has no relation to what is in your checking account.  You took money out of your CC payment "envelope" to cover a purchase for another category.  You either have to pay the CC payment category back before you make your payment in full, or pay the available amount.

    I'd advise not leaving money in TBB, even temporarily.  I just set up a "Holding" category for the extra bucks I'm not sure about or think I may need to cover for something else before the end of the month.

    Like 2
    • Annieland 

      Yes, I understand that the amount in my CC payment category has no relation to what’s in my checking account. What I said was probably misleading in that regard. The issue with adjusting the CC payment category to “pay it back” so it doesn’t show as overbudgeted anymore is that doing so puts my entire budget out of balance.  

      Any amounts on that credit card are amounts that were budgeted for in the other categories. For example, Groceries, or Restaurants. 

      Like
  • Remember that YNAB is a cash based system. The payment category represents the cash you have set aside in your budget to pay your credit card, so the amount needs to be equal to or greater than what you plan on paying. So you paid more than was set aside for the payment. Move however much money you need to to bring the category available balance back to at least zero.

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    • Tobias That normally makes sense, but doing so throws the entire budget out of balance. The payment I made was to partially pay off purchases that had been budgeted appropriately in other categories. For example, I paid $850 of a $1,500 balance. Of that $1,500, roughly $300 was for groceries. So it feels like YNAB wants me to double budget for every dollar spent on a card. 

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      • Tobias
      • Toviathan
      • 9 mths ago
      • Reported - view

      Ju Man Shu When you make a budgeted purchase on a credit card in YNAB, YNAB will move the funds from the category you used to the payment category. If you are paying more than you had in budgeted purchases, then that money has to come from somewhere.

      Think of the envelope system and how it would work in the real world, since that is what YNAB is based on. I'm going to use your $300 grocery example and assume that that was budgeted for. You go to the grocery store and put $300 on your credit card in groceries. No actual money has left your budget yet since you will pay your credit card back at a later date, but now the purposefor those $300 has changed. It is now meant to pay back the credit card. So YNAB is going into your grocery envelope and taking the $300 out and putting it in the envelope that is meant to pay your credit card bill.

      Now that you are paying the bill, actual cash will be leaving your budget. You can't pay more than you have, so the envelope must have enough to cover your payment at least. And if that means you have to add more money to the envelope, then that's what you need to do since right now, we only have $300 in there from the example.

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    • Tobias I’m not sure I follow. My Groceries budget is unchanged—it doesn’t look like YNAB moved any amounts from there to CC payments. And if it did that, wouldn’t that mess up the Groceries budget? The activity in Groceries would be the same but the budget would be less if YNAB moved budgeted amounts? I also haven’t noticed the amount in the CC payments category changing based on any spending I’ve done with that card. 

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      • Tobias
      • Toviathan
      • 9 mths ago
      • Reported - view

      Ju Man Shu The available amount is what would change, not the budgeted amount. The budgeted column only represents what has been added to or removed from a category in a  given month. The available amount is what you would look at for the change.

      So that is a big question, were there any fund available when you made the purchase? If there were no funds available, then no funds would move. You can take a look at the activity screen on that credit card by going to the category in the budget and clicking on the number in the activity column, which will brink up a screen like the one in the screenshot here. That will tell you if you had budgeted or nonbudgeted spending.

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    • Tobias Okay, yes that makes sense and the available amounts did change. There were available funds when the purchase was made in the case of those groceries. 

      I believe the problem is coming from those purchases I mentioned that we pay off half of with one paycheck and the other half with the next paycheck for the month. This is what we do with rent. It’s $760, charge it to the credit card, pay $380 now and the other $380 in the second half of the month. This spreads our expenses across the month so we have an even amount of money after expenses with every paycheck. To reflect this in YNAB, I budgeted a negative amount in CC payments.

      However, the more I understand about YNAB the more it seems like this method might not work cleanly with the system. It won’t work forever anyway, since when we actually buy a house the bank won’t take a credit card for mortgage payments. 

      But then how would you treat putting expenses on a card that you don’t immediately intend to pay off with current available funds?

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      • Tobias
      • Toviathan
      • 9 mths ago
      • Reported - view

      Ju Man Shu Just put them on the card and let the categories go negative. Credit card overspending works a little differently than cash overspending. Cash overspending must be fixed to be able to trust your budget, but credit overspending doesn't directly impact your budget since the budget is based on cash.

      So lets use your rent example: On the first of the month, pay rent on your credit card and categorize it to rent in YNAB. The rent category will show a negative 760 in available and it will be yellow/orange. When you get paid next, if you are covering half the rent then budget 380 to your rent category. The available balance of rent will go to a negative $380, and the $380 you just budgeted will go directly to your credit card payment category.

      This will only work if you are covering those expenses in the same month you spent the funds. When the month changes over, YNAB will clear those negative balances from your categories and the difference will simply be added debt to your credit card. In that case, you would have to budget directly to the payment category.

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      • Tobias
      • Toviathan
      • 9 mths ago
      • Reported - view

      That lets you take care of the categories. You will still need to make sure that there is enough money in your payment category when you are making payments. If you need to pay more than what is in there, then you will either need to budget funds directly to the payment category, or you will need to make enough budgeted purchases on the card to move enough funds to cover the payment.

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    • Tobias Makes sense. Thanks for taking the time to respond to all my questions! You’ve been very helpful and informative. 

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    • There were purchases made this month that we did not want to immediately pay off, so to avoid showing my entire budget as overspent I budgeted a negative amount in the credit card category, as we still technically had those funds in our checking account. 

      Ju Man Shu We don't recommend covering overspending from the Credit Card Payment category, or budgeting a negative amount. That means you're changing it's job, and there will be less money set aside for your credit card payment.

      It's good to check your Payment column first, to make sure there is enough to cover your intended payment.


      Just in case, I wanted to include a few resources. These two HelpDocs will explain more about the behavior discussed earlier in the thread:

      Like
    • eloquentz
    • Numbers Wizard (Accountant), Acoustic Artist (Musician) and Jill of all Trades (Wife & Mother)
    • eloquentz
    • 9 mths ago
    • Reported - view

    I find this sometimes happens if I pay the amount in the CC payment category but then some other category is overspent now (and I didn't notice yet) and it was a mix of credit and cash and it is now prioritizing the cash spending and the amount I paid on my CC was "too high" because YNAB stole from this category to cover the cash in the overspent account.

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    • WordTenor
    • I have the honor to be your obedient servant
    • WordTenor
    • 9 mths ago
    • 3
    • Reported - view
    Ju Man Shu said:
    But then how would you treat putting expenses on a card that you don’t immediately intend to pay off with current available funds?

     If you are going to pay the card, then you must budget for that card payment before you make it. That really is the beginning and end of the story. Tobias has given you a method above to budget for the rent in two payments, but if you pay the card in between those two payments, it won't work to have only half the rent budgeted for. There's a way to temporarily increase credit card debt carried in the budget (by leaving categories overspent) but it relies on you not paying more to the card than is available to pay the card. If you are going to pay $X from your checking account to the card, $X needs to be available in the budget for that purpose before you do so. 

    Like 3
  • Ju Man Shu said:
    to avoid showing my entire budget as overspent I budgeted a negative amount in the credit card category

    At that point, you should have budgeted the new funds that showed up in TBB to the negative (overspent) spending category. Did you?

    Ju Man Shu said:
    And now YNAB is showing a fat red number in the credit card available column.

    Because you sent them more than was in the Available column. Effectively, you sent them money that is earmarked for something else in the budget. You'll need to decide what category doesn't have money as a result. (This will fix the negative TBB, discussed below.)

    Ju Man Shu said:
    If I try to budget for that red amount, as I have seen suggested, then my entire budget shows as underfunded

     Which is correct, because money doesn't appear out of thin air. If you increase what you budget toward the CC Payment category, something else needs to decrease -- in this case TBB. If it was $0 before, it's going to be negative afterward. Move money from some other green category to fix TBB (mentioned above). Note, you could have also moved money directly from a green category to the CC Payment category.

    Like 2
    • dakinemaui 

      Yes, the “new” funds were budgeted to the appropriate category.  

      I get the concept of moving funds to cover overpaid categories, but if I have to do that in large amounts that just tells me I’m bad at budgeting. Which it seems like I am, or at least that I need to change my approach. Plus, there’s not enough to cover it. So fact of the matter is I overspent, which is not an easy pill to swallow. Hopefully this will deter me from that in the future. 

      Regardless, thanks for your help.

      Like
      • dakinemaui
      • dakinemaui
      • 9 mths ago
      • 1
      • Reported - view

      Ju Man Shu The budget is just your plan for your cash at the moment. I guarantee that you will not correctly predict everything exactly correctly all the time. Reallocation is just acknowledging this reality and moving forward.

      If you were expecting 3 guests for dinner and 4 showed up, would you stubbornly stick to the plan or would you revise the plan and set another plate? 😄

      Like 1
    • dakinemaui Oh yeah, don’t get me wrong I definitely agree with you. But as you said, money doesn’t appear out of thin air and there’s not enough in the budget to cover this particular case of overspending. The simple fact this month is that we spent more money than we had, and my efforts to disguise it to make it look like we didn’t (like budgeting for negative amounts) won’t do us any favors. YNAB just takes a different approach than forecast budgeting, which is what I’m used to. 

      Like
  • Nicole said:
    We don't recommend covering overspending from the Credit Card Payment category,

    That's a shame, as there are two excellent reasons to do so.

    1. Convert cash overspending to new CC debt. You may note this is exactly what YNAB automatically does within a category whenever possible. Doing it manually can cross category boundaries.

    With regard to Rule 3, sometimes maintaining debt is the lesser priority, especially when cash is needed. The methodology absolutely supports reallocation from the payment category.

    2. Turn off the "nag" when the user has made a conscious decision to finance something on a CC. I think the yellow category looks like a mistake. Then again, I was introduced to the methodology when Rule 3 was actually a rule.

    Like 3
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