Credit Cards! So confusing

I don't understand why if you overspend in a category using your credit card it then misaligns the budgeted and payment column in the cretdit card row. It's a mess.

Why do you then need to "budget" for a credit card bill to fix it? Surely you budget for categories of spend (like food, clothes etc), not by payment type.

Whether the overspend is done with your current account or credit card is immaterial. I have reset my balances so many times and it messes up within a month.

 

Clearly I'm not getting it, and by the looks of the other comments on here, other people don't get it either. Is there a way to turn off the weird way credit cards are handled?

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  • Credit card handling in YNAB can indeed be confusing.  YNAB does not have the fidelity to determine what account a category was overspent in.  YNAB only has the fidelity of a 1 month view.  I've had situations where I had all of my credit cards current balance paid to 0 and then overspent in a category using a debit card and YNAB assigned the overspend to two different credit cards since I had previously used those two cards in that category.  That was a real head scratcher trying to figure that out.  I also do not like the same color (yellow) used for overspend using a credit card and underfunded for a category.

    The correct solution for this problem is to cover all overspent categories by moving funds from another category to cover the overspent category.  If you do that then the credit cards will straighten themselves out.  However, I wish YNAB could determine transaction order along with credit card balance within the current month so this problem would not occur.

    There is another solution if you are indeed a paid in full credit card user.  That solution would be to convert all of your credit card accounts to checking accounts.  That is actually how the previous version of YNAB worked and a lot of us old timers have chosen this method, we do not need the extra babysitting provided by the new credit card algorithms.  This way all spending will be treated as cash so it no longer matters.  You just simply need to monitor your overspends to ensure you have enough in your checking account to cover them.  Another advantage to this is that all overspending will be red and under funded will be yellow, much simpler.  I do want to stress though that you need to be a paid in full user, basically treat your credit cards as debit cards.  I have a different mindset for credit cards anyway, I do view them as debit cards.  I do not see myself ever paying interest on a credit card (hopefully anyway LOL).

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  • The credit card row is the Credit Card Payment category. It doesn't automatically reflect the credit card balance, you have to use YNAB properly in order for that to happen.

    Like any other category, it shows you how much money you have reserved for each purpose. If you did not have enough money in the purchase category for the purchase when you made it on the credit card, you also don't have enough money to pay back the credit card for the purchase. If you have $50 in the groceries category but then you spend $75 in groceries on a credit card, YNAB will only transfer $50 from groceries to credit card payments, because you don't have money in your budget to cover the other $25.

     

    If you correct the overspending in the spending category in the same month it happens (ideally you are supposed to correct oversepending immediately in all cases ... see Rule 3), it will fix the credit card payment category. if you wait until a new month has happened, new money cannot flow back in time to before you have received it, so the only way to cover it at this point is to treat it like carried debt and budget directly to the card payment category.

    Credit cards are really quite simple. Budgeted spending on a credit card transfers the money to the credit card payment category. Transfers to the credit card from another account are payments. Anything other than those 2 things will cause the payment category to fall out of alignment with the card balance, and the only way to fix it is by budgeting (or unbudgeting) money from the category.

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  • Others have explained it well but a shorter version is this: it’s an envelope budget. If you have an envelope labeled “pay the card” and an envelope labeled “groceries,” when you use a credit card at the grocery store you take the money out of groceries and put it in the “pay the card” envelope because now you’ll need to pay the card back. If you use the card for an amount that is more than what’s in the groceries envelope, you literally can’t move the money to pay the card because it’s not in the envelope to begin with. 

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  • Violet Thunder said:
    Why do you then need to "budget" for a credit card bill to fix it? Surely you budget for categories of spend (like food, clothes etc), not by payment type.

     If you are still in the same month you can budget for the food/clothes and YNAB will move it to the CC payment category for you. If the overspend was last month then you have to budget for the debt you created, which is done by budgeting to the CC payment category.

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