Budgeting Credit Cards

(Re-posting this here, as I had mistakenly posted it in Community.)

New to NYAB, and finding out there is a huge learning curve to this type of budgeting! Loving it so far, though!

I can't figure out exactly how I should be doing credit card payments.  When I set up my budget at the beginning of the month, I budgeted for a $175 payment to Visa.    That made my "activity" $175, and my "available" $0.  I could follow that. The payment was made with two transactions; $140 towards the running balance, and $35 for monthly auto-payments for streaming services. The split payment was part of my OLD bookkeeping ways!

But then....

A transaction pulled thru directly from Visa.  $14.08 for Netflix (see above).  I do have a category for those auto-paid "Streaming Services"  ($35 budgeted).  So, now I see Streaming Services: B$35, Act. -$14.08, Av. $20.92.  That makes sense.   Visa is now: B$175, Act. -$160.92,  Av. $14.08

What I can't wrap my mind around is how I budget for the Credit Card payments when the transactions going thru make it look like I still need to pay.  Do I need to get one month ahead of those auto-transactions? Do I have a category within my Budget (not part of CCs) for the actual Credit Card payment?

And I won't even get started on trying to figure out the "Interest & Fees" that now make me look like I have a negative balance in my TBB. 

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  • So, if you're a Paid In Full (PIF) CC user, you only budget for your starting balance of your old bookkeeping ways.  After that, you budget for every purchase you make in its respective category as you make it.  YNAB then moves money from your Streaming Services category to your CC category to set it aside to make your CC payment when you're ready. PIF CC users always keep their CC category available equal to the amount they owe on the CC account, which usually doesn't require budgeting directly to the CC category.

    Now, if trying to budget all of these things is making your TBB red, but you're not paying interest, you're on the CC float (there are articles about that on the YNAB blog).  The way to get off of it is to keep making budgeted purchases such that there is always more money to cover old purchases, and budget more as you can to the CC until the available is equal to the amount you owe.

    However, it seems you are paying interest, so you have some debt to pay off.  What you do in this situation is to budget for your normal spending (including interest, which should show as a spending transaction in the interest category), let YNAB move that money to your CC available, and budget as much as you can to the CC category to pay down the debt. 

    If you can't do that without making TBB go red (you should never, ever, leave TBB red, or any other categories red, for that matter), then reallocate money from other, lower priority categories.  If there are no categories to reallocate from, you can move from your CC available category.  Just keep in mind what the minimum payment is, and know that you'll need to pay back that debt later when you can.

    Did I get your situation with one of those scenarios?

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  • Just Tera said:
    And I won't even get started on trying to figure out the "Interest & Fees" that now make me look like I have a negative balance in my TBB. 

     If you don't have money available in TBB, you cannot budget for your Interest & Fees. It's just like any other category. You wouldn't let your TBB go negative to budget to your Fun Stuff category. Same deal here.

    Now, if you are carrying credit card debt, you will still incur interest and you should record the transaction in YNAB. But let the category go negative, not your TBB. When the month rolls over, this overspent category will become part of the ongoing credit card debt.

    If you do have available TBB, you can budget it either to Interest and Fees or to the Credit Card Payment category.

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      • Just Tera
      • just_tera
      • 5 mths ago
      • Reported - view

      jenmas I guess what I am trying to figure out is do I make a separate category for interest? Like, what should the actual budgeted CC payment be, if the interest is a separate category, and the 'streaming services' is a separate category.  Do I say, well, I will budget $35 for streaming (separate category), $70 for interest (separate category, and $70 for the payment (under the CC category)? Then when they all clear, the total payment made will be $175.

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      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • 1
      • Reported - view

      Just Tera That's the recommended approach. Look at the Available column of the CC Payment category and send that much.

      Later when that amount is lower than the Statement Balance, consider only paying the statement balance and holding the rest of the Available for the following month's payment.

      Like 1
  • Thank you for your help. I long to be a PIF CC user, but alas, that day is far off.  As it is, barring an emergency (working on that savings, also), I try to stay away from using the CC.   The only thing charged to the CCs are the streaming services (we don't have TV/cable), hence the separate payment; I didn't want them to get lost in the paying-down of the bill.

    As far as my actual credit card payment, I pay as much as I can above the minimum.  In this case, the minimum payment was $112. My 'actual' payment was the $140, with the $35 dollar payment just canceling out the streaming services charges. 

    My TTB *wasn't* red until the interest came thru as a transaction. Of course that makes sense, since it is in a sense a "charge" to the account. However, when I get my paper bill, I know the interest is on there, but only viewed the bill as balance owed and payment due. In my head, I *am* (was??) paying the interest within my payment, so didn't need to budget separately for it.

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    • Just Tera Then, what you do is this (order matters):

      1. Budget your $140 (or other amount) to the CC category to fund the debt payment.
      2. Input the interest transaction, temporarily overspending the interest category.
      3. Click the negative available on the Interest category (Move Money Tool).
      4. Choose "Cover this overspending with ___ CC category."
      5. Watch with glee as the budgeted numbers change in both Interest/CC category, but the CC available doesn't change, and the interest overspend is eradicated.  I always got giddy, anyways.  I liked to put the interest category right up under the CC group so I could watch this.  Maybe I'm weird. :)
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    • Just Tera To deal with this first time, you can try 4 things:

      1. Reallocate from the CC payment category, but it might not work easily because the timing does matter. 

      2. Change your starting balance to include this first interest amount, as long as it's not confusing.

      3. Budget for this interest anyways, moving from some other category.

      4. Leave the interest overspent (make TBB green again) and do my steps above next month.  As jenmas said, that will effectively be rolling the interest into the larger payment/debt balance when Feb 1st happens.

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    • whoops, forgot #6.  This is the one that you cannot do before the other 5, or it won't work.

      6. Make the CC payment, looking at the CC available that will include the budgeted interest ($70), budgeted debt reduction ($70), and budgeted purchases ($35). 

      This is almost exactly like you said above, but I stumbled upon my way, and I really like the way the numbers change in YNAB's interface.  It's delightful! (and it's nice to have something nice about debt...)

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