Credit Card arrears payments

How do I budget for  credit card expenditure when the payment is made in arrears, for example I paid today for activity recorded in Sept.  I pay off the full balance every month, but it's hard to record that in YNAB. 

So any expenditure I make this month, won't be paid for until January 6th.  How do I makes sure my budget always looks correct, as when I make that payment in January it will show as activity on January's credit card activity.

Is there any advice you can offer?
Thanks

Col

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  • I've found that the credit card budget categories are only useful if you carry a balance. If you pay it off every month, all the activity is really recorded in the categories you assigned the credit card transactions to and the credit card category is essentially just showing all that activity again (note: the software properly takes this into account so there's no actual double counting in totals). As far as I can tell, the credit card category is only useful as a way to budget money to pay off debt, a way to budget money to cover credit card spending that exceeded the balance of the category the transaction was assigned (personally, I would put the money towards the budget category of the spending to reconcile this instead of the credit card, but to each their own), or as a way to check that the amount available equals the amount in the activity which proves that you've properly covered your payment.

    Since I always cover my credit card spending and have no debt, I just hide the credit card budget category since it's not useful to me and I find the number in there confusing like you do.

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    • Tomato Colt (0bcf162afc41) I think that's essentially what I'm going to do. The only problem I can't really work out is how then to represent the credit card payment. The money has to leave my account to ensure the balance it right in my account but when I made it this month it showed as a positive balance on my 'credit card balance'

      I'm really finding YNAB helpful but I just can't get my head around this issue. 

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    • Silver Lion (bc419e839d57) I'm not sure I'm following you. You made a payment to your credit card and logged it in ynab as a transfer from the account where the payment came from to the credit card account (no budget category on the transaction). And then you're saying that the balance of the credit card account is positive? And this doesn't match the current balance of the account when you sign in to the credit card's website? Did it match the current balance before you made the payment?

      If this is the problem you're describing, was the initial balance on the account correct? Did it match the balance of the card on the day you created the account in ynab? It sounds like it might have been 0 which would explain the problem I've stated. If so, I'd go back and change the starting balance of the ynab account to match the difference between the ynab account balance and the actual current account balance. Then you'll need to add that amount to the credit card balance budget category for the month you opened the card to indicate that you paid off that staring balance. After that, the credit card balance budget category should always be positive because as Janelle says below, it indicates how much money is available to pay off your credit card balance, which in your case should always be the balance of the account.

       

      Does that make sense? Or did I totally misunderstand your problem?

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    • Tomato Colt (0bcf162afc41) it's not the credit card account balance that shows positive. That still has a negative balance. 

      I had the scheduled transfer set up for 3 November because that's when it comes out of my account in reality. But because that payment is paying off activity made in sept/October and I haven't made any purchases this month yet, the transfer shows up in the credit card 'activity' in the budget. When I click on the activity and it usually shows the expenses that have been accrued there, it also shows a credit of £1000 which is the transfer of the payment for earlier months' expenditure. Does that make sense?

       

      Col

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      • Daniel Hopkins
      • Software Engineer
      • hoppities
      • 3 yrs ago
      • 1
      • Reported - view

      Tomato Colt (0bcf162afc41)  yeah...I think the credit card stuff is really odd. I never carry a balance on our cards. This really seems to throw off the Total Activity number. Since it sums up the credit transfers and all of the credit transactions in my other categories. My activity looks super high. I've started ignoring the Activity number and just using the income vs. expense report.

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    • Cadet Blue Trombone (1e5200ebb6f8) that's really helpful.  Thanks.  It's that 'Total activity' bit that's been throwing me off a bit.

      I' haven't really familiarised myself with the reports section too much yet.  I'll have a look at the one you mention and see if that's easier to use.

       

      Thanks for all the help.

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  • Hi Silver Lion ! So glad you asked :) That credit card payment category is there so you always know what you have available to send toward your payment! With YNAB, it matters less which month you make your payment and more that you have exactly what you need for that payment.

    Here’s a video explaining the two ways money gets into your credit card payment category:

    1. When you purchase something you budgeted for and use a credit card, we call that budgeted spending. Dollars from budgeted spending on a credit card will automatically be moved from the category where you budgeted them (like groceries) to your credit card payment category. Your grocery Available goes down by $70, your credit card payments Available goes up by $70.

    2. When you budget additional dollars to your credit card payment to pay down that balance even more. They'll be added to the dollars that got there via budgeted spending. For example – budgeting for the starting balance on the card.

    No matter which way dollars get into your Credit Card Payments category, the amount Available is your payment. Here’s an article that covers making credit card payments in detail.

    So, if this was your first ever payment in YNAB, you most likely were covering a bit of a starting balance on the card (transactions which took place before you began your budget). You'll want to budget the amount of that starting balance directly to the Credit Card Payment category. That’s what lets the budget know you plan to take some of the money you have and use it to pay off that existing balance. 

    Going forward, as long as all your purchases are fully budgeted, you'll always have what you need for your full payment :) 

    Let us know if you have any questions about this!

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    • Janelle at YNAB Having just read this, I'm not sure it answers my question.  The problems I'm having with YNAB I think is that my credit card statements are produced a month after the expenditure has happened. For example, I paid £2000 for my credit card bill on 6 November, but the bill was for things I purchased in September/October.

      I think YNAB calls it 'living on the float' or something.  I'm just wondering how I truly reconcile my budget when a payment comes out of my account this month for £2000 (for previous expenditure), but then I only spend £1000 of budgeted money on the card within the month of November?

      Is there a way, trick or tip anyone has to ensure that my budget is always reflecting the actual state of play?  At the moment I have £700 of credit card expenditure in November that YNAB assumes i'll pay off on the 30 November. However, I know that my next bill will be more like £1800 for expenditure in October.

       

      HELP!

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 yrs ago
      • 1
      • Reported - view

      Silver Lion (bc419e839d57) When the statement is generated and when you pay it don't matter. When you make a purchase on a credit card using a category and you don't overspend, the money that was in the category is then reserved for your credit card payment.

      Where things get messed up is if you don't budget to the payment category for the starting balance from when you first used YNAB because that balance was not budgeted for (You made those charges before using YNAB) or you overspent a category with a credit card purchase, so not enough money was transfered to the credit card payment category by YNAB.

       

      To answer your question, about making sure your budget is correct and avoiding the float, the Credit Card Payment category must be a positive value that is equal in magnitude to the credit card account balance in YNAB. So if your  balance is -$1000 on the credit card, then it's payment category should be $1000. This tells you that the entire balance on the card is able to paid within your budget.

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    • Silver Lion (bc419e839d57) , nolesrule is correct. Ynab doesn't care when you pay it off. It's just telling you how much you have Budgeted to make a payment. You've Budgeted for that payment by having money available in the categories of your credit card purchases. It looks like double counting, but the credit card payment category only applies to transfers to your credit card account so it works out.

      Unfortunately it does make your total activity look weird since total activity only counts credit card payments and not transactions. This is technically correct since the money doesn't leave your budget until you make a payment (you're living on the float), but it's not always useful since it doesn't reflect how much money you're spending/debt you're accumulating.

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  • Thanks for all the help, but I just can't get my head around it.  If someone could physically show me what I need to do that would be helpful, but fat chance of that! ;-)

    I might just start my budget again at the start of the month and see if I can get it right next time.  Or give in!

    I'm loving YNAB, but I can't ever seem to work out how much money I physically have left or what I can budget for my savings category! 

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