Credit Card Interest and Multiple Cards

I'm a newbie and I'm struggling a bit with credit cards. I've watched all the videos and read the articles and I'm still not 100% clear on some things.

 

I have 3 credit cards. I want to put $250, $100, and $100 on them. I usually pay $125, $50, and $50 with each paycheck (I'm paid bi-weekly). I set up my goals and I thought I was okay until the interest hit the cards. I went back and read what to do with interest, creating a category for it. I'm now trying to figure out how to adjust my goals to cover interest? The interest on 1 card was $8.90. Do I set the goal to be $91.10? That way I budget $91.10 for a CC payment and then $8.90 for interest and that covers all $100 I want actually going to the card and I've reached my goal?

 

And another thing I can't figure out. I have the interest for all 3 cards going into 1 category for interest. Is there a way to budget for just 1 of the three? I tried to do that and it automatically moved the budgeted money to the wrong credit card. I would like to be able to manually tell it which credit card I want the budgeted money to be applied to.

 

I hope I'm making sense and not overthinking things. I really love YNAB so far and just want to get the hang of it.

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  • If you want to send $100 in total, just budget $100 to the CC payment category and don't budget for the interests. The interests will be added to the debt which will be reduced by $100 when you send the payment.

    The interests category will be yellow. You can either leave it yellow or (preferred) if you want to take good habits to cover all overspending: move money from the CC payment category to the interests category. This will reduce the amount budgeted to the CC payment category and budget for the interests without you having to do any maths or guess what the interests will be the coming month. The available in the CC payment category will still be $100. Because the money you moved to the interests category has now been automatically moved to the CC payment category (through the Activity column) to cover the interests expense.

    Like 1
      • Alcarinque
      • alcarinque
      • 3 mths ago
      • Reported - view

      Ceeses But will it then tell me I haven't met my goal of $100? It looked to me like it doesn't include spending/interest in achieving your goals.

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      • Ceeses
      • Ceeses
      • 3 mths ago
      • Reported - view

      Alcarinque Yes, because the goal does something different from what you want to do. You want to pay $X per month towards your card. The goal is if you want to pay off your card by a given date. Obviously, if you don't budget towards the interest, it increases your debt on the card and hence increases the amount you need to budget to the CC payment category if you want to meet the date target of the goal or you need to move the date target. 

      So, if you want to pay a fixed amount per month on each card, don't set a goal as the goals aren't doing what you want to do. 

      If you want to pay your card by a given date, set a goal and budget for interests.

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      • Alcarinque
      • alcarinque
      • 3 mths ago
      • Reported - view

      Ceeses When I set up the goal I chose "Pay specific amount monthly" because that's what I want to do. The amounts I've chosen cover interest, the minimum payment, and then some extra.  That's why I was wondering about changing the goal to not include interest.

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      • Ceeses
      • Ceeses
      • 3 mths ago
      • 1
      • Reported - view

      Alcarinque Then if you want you can leave the interest category unbudgeted. It will be yellow for the whole month. But it will reset to 0 next month. The overspent is then considered added debt on your card. Unfortunately, I don't think you can have it without a yellow category if you set a goal on the CC card.

      Like 1
      • Alcarinque
      • alcarinque
      • 3 mths ago
      • Reported - view

      Ceeses I was really hoping I wouldn't have to leave the interest unbudgeted. Thank you for your help.

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    • Alcarinque Just take the goal off the CC and put the amount you want to budget in the category title. 

      No yellow warnings when you move money to cover the interest!

      Besides, it's not like the goal takes into account your biweekly funding schedule...

      Like 1
  • Alcarinque said:
    I would like to be able to manually tell it which credit card I want the budgeted money to be applied to.

     You can't do that with only one category. With only one category for the interests, you will have to check the Available in your CC payment categories. If you do as I said in my previous post, you might move money from card A to interest category and YNAB will use that money to pay interests on card B + bit of card A. When that happens, the Available amounts in the payment categories for card A and card B aren't good anymore. You will have to move money around your CC payment categories so that the Available equals the amount you want to send to each CC.

    Like 1
      • Alcarinque
      • alcarinque
      • 3 mths ago
      • Reported - view

      Ceeses I was afraid of that. I was hoping I didn't need 3 separate interest categories.

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  • The easiest solution here is just to remove the goal. You know how much you want to pay each month, so just do that. Budget the money to each credit card category and pay it. 

    I will save my more general grumbling about the primacy of goals in the startup materials for other media.

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  • This post turned out much longer than I anticipated but I wanted to pass on my experiences! I hope it helps.

    Hi there, I have a similar situation and will tell you what I do. It may seem a bit complicated at first but it will depend on what you want to do. I am also paid biweekly and found out that the flaw in my system last year was that I set up the monthly goal based on 2 pays per month. I had a scheduled transaction to pay on every paycheque so that meant in the month with 3 pays I had to choose to either not make a payment that pay or find the additional dollars for it from somewhere else. I have adjusted for this year so hopefully I will even things out. I will explain below.

    How to determine the payment amount

    In my debt paydown, I budget for the interest in the interest category and then budget for the principal paydown in the CC category. I figure out what the interest amount is and budget for that amount in the interest category. I also set up a recurring scheduled transaction for the interest once a month on the statement date with that amount. As the transaction moves from scheduled to pending, YNAB moves the interest amount to my CC payment category. I can then adjust the actual interest charged on the transaction and again YNAB will make the appropriate adjustments. If the interest charge is more than available in my interest budgeted amount, I will have to increase it. If the interest charge is less, YNAB will only move the amount of the transaction. I monitor and adjust my budgeted amount and the scheduled transaction as the interest moves down. I normally only do it when the amount materially changes. I can easily move any overbudgeted amount on an ongoing basis. It is very similar to budgeting for utilities or any other variable expense.

    Since I have taken care of interest through the interest category, the repayment of the principal amount becomes an easier calculation. I take the amount of the loan and figure out how much I want to pay based on whatever criteria I choose. There are calculators online that will assist. Then I can use that to set the goal. It is important to know whether you are going to make monthly or biweekly payments so see the next couple of sections.

    Monthly payments

    If you are going to do a monthly physical payment, then you set the goal to that amount and make that payment every month. In most months you can choose to contribute 50% each biweekly pay. In a month with a third pay, you can choose to ease the stress and split the contribution across all three cheques OR use your 3rd pay for something else and still contribute 50% off the other cheques.

    $200 per month would be a goal of $200

    Biweekly payments

    If you choose to physically make a payment every biweekly paycheque (to help pay down faster and reduce interest charges), you need to set the goal differently to ensure that you have enough built up for that third pay cheque OR scramble to cover it. In my case it was a large amount so it was difficult and I didn't like it. To figure out how much you need to save every month in order to have the correct amount sitting there on the third paycheque month, do the following calculation:

    (payment amount X 26.1) divided by 12  

    26.1 accounts for the months where there are 3 paycheques. You don't get 26 cheques, you get 26.1 over the course of the year. It works. 

    Example $100 per pay X 26.1 =$2,610 divided by 12 = $217.50 

    Set your goal for $217.50. When the third pay cheque arrives, you should have enough to pay. You may need to adjust based on when the third pay falls but it does help.

    Once you have determined the monthly vs biweekly payments, you can also enter the payments as scheduled recurring transactions. To continue with the example, you would either set a recurring transaction for $200 once a month on the statement date OR $100 every two weeks on your paycheque date.

    Done and done.

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