How to fix overspending/overpayment issue

I sometimes buy things with PayPal, but charge them to a credit card, and then transfer money back to the card that month to cover it.

With the recent YNAB changes, something weird seems to be happening: I can't figure out how to cover my overspending.

For example, I bought something for $34.92. The transaction was entered into my PayPal account in YNAB, with a transfer from my credit card to pay for it. Now, my credit card shows $34.92 overspent (even though the amount was budgeted for in the original category selected in the PayPal transaction). I assume this issue is because transfers can't have categories, so the credit card perhaps doesn't know where to deduct the "overspending."

I made a payment of $34.92 to my card specifically to cover that amount. But now under that credit card account, it shows a red -$34.92 unbudgeted payment and still $34.92 overspent.

I'm confused about how to correct this situation. Is it expecting money to be moved differently? I can't find a way to simply say "this payment covers that overspending"

It would probably be easier if I just cut PayPal out of the mix and used my credit card directly, but sometimes that's difficult to do depending on what payment methods a place accepts or has on file.

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  • To clarify one thing:

    I've tried simply adding $34.92 to my credit card payment budget. However, there are two problems with that:

    1. Since I already technically budgeted for this $34.92, that seems to mean I'm budgeting more for this than I should be, essentially hitting my budget twice for the same charge.

    2. That zeroes out my red -$34.92 unbudgeted payment, but it still shows a yellow $34.92 overspent on the card.

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  • I ended up moving the real transaction from PayPal to my credit card account and deleting the existing transfer between PayPal and my credit card. This seems to have resolved the issue, now both the overspending and the overpayment are gone.

    I don't like this solution as I feel like my books aren't as accurate--while it won't affect the totals, it now looks like I paid with my credit card directly and my PayPal ledger has no record of the transaction at all. So I'd still really like to know if there's a better way I can handle this.

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

      Ben McClure  I don't keep paypal in my Budget at all, because it just adds an extra layer of complication. In addition I try to maintain a zero balance in my paypal account at all times. If there's cash, I sweep it back to the checking account ASAP. As a result I can just do inflows or outflows directly in the accounts they transfer to/from without having to deal with the complications that having the paypal account on budget introduces.

      Like 1
    • nolesrule That sounds like a good solution in some cases, although I do use PayPal for things a lot, and often I do have a balance (due to Ebay sales and such). I alternate between using it as a checking account, and using it simply to pull funds from other accounts. It seems like it would be more confusing for me if I could not track my PayPal account with the rest of my budget, for the times when I end up using it like a checking account with a balance.

      Normally it's not very complicated--I log a transaction in PayPal, and log a transfer from another account if required to cover the payment. It seems like it's only this new credit card functionality that is getting confused by the extra layer of abstraction.

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

      Ben McClure So, here's what happens when you transfer money from a credit card to a non-credit account:

      1) You have unbudgeted spending on your credit card, thus the overspend in the payments category

      2) You have new money in the account receiving the transfer. Because you have this new money, the transfer amount appears in your TBB (this is the part a lot of people miss)

      The solution is to immediately take those funds from TBB and budget them back to the CC payment category. You will also run into this problem if you track gift cards within your budget that you purchase with a credit card and use a transfer to fund.

      Yeah, a bit unintuitive, but think of it as a cash advance. It's still a charge on the credit card, and you owe the credit card that money. But you have the same amount of money in your pocket and it hasn't been given a purpose yet.

      Like 1
    • nolesrule  Ah, that makes sense now, I think. I did not notice To Be Budgeted going up when I transferred the money from my credit card to PayPal--I guess I completely missed that. But that does explain the issue.

      While that does solve most of the problem, it still shows overspending on the credit card for me. Is that a bug, or have I possibly missed something?

      Thanks for the reply!

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 yrs ago
      • 2
      • Reported - view

      Ben McClure  You did technically overspend by taking money from the card that wasn't budgeted. And yes, I realize it was a transfer. Credit cards do not behave like cash-based accounts in YNAB.

      Remember, it was the transaction in Paypal that had a category.

      You absolutely have to take the extra that goes into TBB and budget it back toward the credit card payment category to make things right. If you budget it anywhere else in your budget, then you are creating credit card debt not backed by a plan to repay it.

      Like 2
    • nolesrule  You're right, I had not noticed the amount getting added to TBB before, but since your previous message I noticed that once I moved the transaction from PayPal back to the credit card and deleted the transfer between the card and PayPal, it reduced my TBB amount as well.

      It all makes a lot more sense now. 

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    • nolesrule  Although I still don't get why it shows that amount still overspent on the card, even after moving that amount from TBB to the credit card payment.

      Edit: Oh, maybe it is just telling me that I overspent, even though I already fixed the situation?

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

      Ben McClure Can't really help you any further without being able to see what's happening. Probably a small detail being missed.

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    • nolesrule  Not sure if this would help, but here were my steps taken:

      1. Charge $34.92 on-budget to my PayPal account for a purchase.
      2. Transfer $34.92 from my credit card to PayPal to cover amount (this causes $34.92 to show as Overspent on the credit card).
      3. Add $34.92 from TBB to the Credit Card Payments category for that card in my budget (this causes it to show $34.92 available for payment, and $34.92 overspent).
      4. Transfer money from a checking account to the credit card to make the payment (now it shows $0 available for payment, but $34.92 still overspent on the card).

      It seems like it's not matching up the payment with the overspending--transferring $34.92 out and then $34.92 back in again seems like it should zero itself out.

      I guess I may change the way I handle my PayPal account to make this easier--I've never had a problem like this in the past, but suddenly it seems to be happening.

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

      Ben McClure Ok, I see what you'retalking about. You can actually ignore the overspent in this case. It's just telling you that you had unbudgeted transactions on your credit card. But because you made up for it by budgeting the TBB from the transfer, it evens out.

      If this is a credit card that you pay in full, ultimately all that matters is that your positve payment available always matches the negative card balance.

      This is some of the new credit card functionality they recently introduced apparently. I had to start a new trial to see it.

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    • nolesrule  Ah, that makes sense. Thanks for the explanation!

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  • Another option might be to enter the transaction in the credit card register with a split $0 transfer to the Paypal account. At least it would show up in the Paypal account then so reconciliation wouldn't be confusing.

     

    The credit card register could look like this.

     

    This entry would be in your PayPal account

     

    Edited to add:  since the funds flow-thru PayPal, but the buck stops in the credit card account, I think I would prefer this method.

    Like 1
    • HappyDance This is a really interesting idea--it does seem like it would simplify things while still allowing me to track my PayPal account, and keep my records straight.

      The only real issue with this method is it would require manually correcting the imported transactions from PayPal, but that would be a small price to pay if it would make YNAB work more smoothly for this use case.

      I think I may give this a shot! Thanks for the explanation!

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  • Glad I found this discussion! This is exactly what happened to me when I purchased a gift card with my credit card. I have a Gift Card budget account set up so that I am able to categorize the gift card money appropriately. So I did a CC transfer to the Gift Card account and saw the overspending on the CC account!

    After seeing the posts by nolesrule , it helps me  understand the reasons. I still don't like seeing Overspending in my CC account but I guess I have to live with it. :(

    I did email YNAB technical support about this and their suggestion was to:

    Instead of entering this one as a transfer, go ahead and enter it as you would any regular spending transaction. Since you're technically buying the gift card, that aligns closer with what's happening in your real-world accounts. You'll need to set up a budget category in this case, and funding that will prevent that type of overspending alert.

    I don't like that suggestion because it wouldn't me categorize the gift card money spend appropriately. Instead, I've done as nolesrule suggested and budgeted the gift card money to my CC payment category. 

    Cheers!

    Jessica

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

      If a gift card can have only one category type, then I will just count it as spending in a particular category. But if a gift card can be used across multiple categories (Amazon, Target), I do a transfer to a gift card account, because I don't know how I'm eventually going to spend the money.

      Category accuracy is more important than convenience, however convenience is pretty high on the list. It's one of the reasons (though not at the top of the list) why I still use YNAB4.

      Like 1
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 3 yrs ago
      • Reported - view

      Jess 

      I too struggled with the methodology in transfers to gift card account.  I buy a lot of giftcards as a fundraiser to support sports activities for my nieces and nephews, and sometimes my church uses this as a fundraiser. Usually, I use my chequing account to buy them (the benefits of being a YNABer and debt free), so the transfer from chequing account to gift card account is straight forward.  When I use my cc, however, a rare occasion and only for the convenience of online purchase, I run into this problem.

      I too was told to record it as an expenditure.  I am not willing to enter $800 spent on groceries this month, and then nothing spent on groceries for the next six months. That results in me not knowing (a) how much I'm spending on groceries, and (b) if there is any money left to spend on the card. The grocery store cards can be used in some mega grocery stores and spent across numerous categories. It's far more efficient to treat them as an account.

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      • ToddYNAB Team
      • YNAB's CPO | Four Rules since 2009
      • Todd
      • 3 yrs ago
      • Reported - view

      HappyDance Jess This is similar to the advice I would always give about cash (which is really what gift cards are). If you spend a little bit of it, call it spent when you withdraw it—but the more cash you spend, the more important it is to track it, so your categories (your budget!) reflect it. So, applying that to $800 of gift card spending makes complete sense.

      Like
  • HappyDance -

    I hear ya! I have replied back to YNAB Support and said they would be discussing internally and get back to me. As soon as I hear back, I will update this thread.  :)

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  • I'm curious about the original issue on this thread, but I've never used a credit card via PayPal to see what it looks like. When I use PayPal for a direct debit from checking, I record the expense in my checking, usually with PayPal as the payee and the "true" Payee in the memo field. (I don't have my PayPal account in YNAB at all.)

    I can imagine doing the same thing with a credit card, but feel like I might be missing something because I haven't seen it first-hand?

    (Also, meta ... we can all just talk about this right here! That saves everyone from having to post back about this support conversation or that one. That way we all learn together, and the next person with the question doesn't have to start from scratch!)

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

      Todd It makes sense not to have Paypal in YNAB at all.... except if you carry a cash balance in your Paypal account and need/want that money in the budget. Some people leave money in the account, some people keep it at zero and sweep out any money they receive immediately.

       

      Also, the official recommendation for splitting the transfer into a pair of transactions creates reporting inaccuracies unless you use the same category for both the inflow and outflow.

      Like 1
  • Hey Ben McClure ,   HappyDance , Jess  - we talked through this among the YNAB team and here are a few extra details on this scenario:

    It's true that any transfers out of a credit card account are essentially cash advances. Those amounts will always show up in the overspending pill at the top right of your account register, even once you've budgeted that same amount into the Credit Card Payment category.

    nolesrule nails it with the workflow detailed above (🎉): 

    1. Enter the initial transaction as a transfer from your Credit Card to your PayPal account (Jess in your case it'll be toward the gift card account). Notice that your To be Budgeted increased by the amount of the transfer – be wary of this though! Those 'debt dollars' come with strings attached if you don't cover the amount of the advance.

    2. Budget that same amount from your To be Budgeted back into your Credit Card Payment category. At this point everything should look right on the budget.

    3. Over on your credit card account register, the transfer amount will show as overspending, and that will remain throughout the current month, even when technically covered by what you've done in step #2.

    4. At this point you can categorize the spending of that cash advance (from the PayPal account in Ben McClure's case, or from the gift card account in Jess's) accurately among your budget categories.

     

    Let us know how that goes for you! :-)

    -Elena

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