Refund to credit card - How to do it?

Started a new budget and entered my balances. Target issued a refund to my credit card for a returned item. So I added a transaction for that credit card with Target as the Payee, and inflow of $42.43. It is requiring a category so I put in To Be Budgeted because that is all that seemed to fit. It did lower the balance of the credit card by $42.43 and when I went back to my budget the amount in To Be Budgeted didn't change. My question is did I do this correctly? It looks to have worked but I just want to make sure that won't cause an issue down the road. What is the correct way to do it? Thank you.

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  • Category for a return should be the same as the original outflow. If that outflow was before starting to use YNAB, the original category is To Be Budgeted (as part of the starting balance).

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    • dakinemaui The purchase was made before I started the budget. It is part of the starting balance.

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    • Maroon Piccolo You did everything right, then.

      Sometimes there is more to do in the budget, primarily for cards with paid-in-full status. In such cases, the CC Payment category should exactly cover the entire debt (account balance).

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    • dakinemaui Thanks so much!

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  • TBB won't change for any credit card transaction unless the account goes positive. The budget is the plan for your cash, which didn't change.

    Yes, that's confusing to most people. I've suggested YNAB should display "Debt Management" instead of TBB in a credit card register. You might file a Feature Request for the same if you think that would be less confusing.

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  • When you entered the starting  balance for the CC, the balance was added to the budget category for the CC payment.  Now you need to move $42.23 from the amount budgeted to the CC payment to "To Be Budgeted'.  This should make the cc payment category match the CC account balance.  

    In the future, any returns would be credited to the category that the original purchase was applied to and you will not have to manually move it from the cc payment category.  

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  • Does the category balance for your CC payment match the Account balance of your credit card?

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    • chicagouser yes, it matches. Thanks for the help.

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  • If I could add on to the original question, is the intent then to budget that credit as normal and then use the CC for those transactions? If that's the case, it could be tricky trying to remember what was budgeted in YNAB using the CC. Make sense? My situation is similar to the original poster but my credit is for a cancelled vacation of $1600. Since my bank can't transfer the credit from my CC to my checking account (same bank), I have two options - one is to follow what I think I'm seeing here for budgeting the refund or two, request a refund check from my CC company and treat it as a normal income deposit into my checking account once the check is in my hand. Then in YNAB, simply do nothing in my CC account since it will automatically go to zero. Am I off?

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    • Cadet Blue Hammerhead Recommended practice is to categorize the inflow back to the original spending category. The credit obviously reduces debt but also the amount reserved for payment. This is a good thing since with less debt, you don't need to make as large of a payment as you were originally planning.

      As a secondary issue, IF the inflow transaction causes a credit balance (positive account), the CC Payment category will normally go negative (as a warning something unusual is going on) and TBB will increase. Simply cover that negative from TBB. The "unusual" part is that the CC is now a cash account since purchases no longer have to be paid back.

      Any refund check at that point is simply a transfer between two cash accounts, with no impact to the budget. This is a totally separate consideration. If you're going to use the CC anyway for budgeted purchases, I don't see the need for this transfer.

      Edit/TLDR: Categorize inflow to the spending category. Cover any overspending. Done.

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      • satcook
      • satcook
      • 2 wk ago
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      Cadet Blue Hammerhead you don’t have to remember what categories you budgeted the money too. You can spend the credit on the credit card from any category 

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    • dakinemaui Makes perfect sense - thanks for replying.

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