How do I budget effectively with consistent use on my credit card?

Hello YNABers!

I have the most infuriating and unresolved confusion on how to optimize my credit card records YNAB. 

A little relevant background: I am an international student and I've been using YNAB to manage my allowance/income whilst in school. Ever since I got a credit card, I use it for practically every purchase (I know this is traditionally not the best habit, but I pay it back at ~50% and the reason I utilize it this much is for good credit for housing and residency). I am also guaranteed to always pay it back fully before deadlines since I never spend more than I hold in my chequing. 

 

Here's the problem, as a result of this mechanism, whenever I budget for my life (groceries, dining out, phone bill, etc.) I've naturally budgeted them in the corresponding categories (not to the credit card category). For example, if I budget $100 for groceries and then use my credit card to pay for $50 worth of groceries, it shows that expense deduction from both the credit card category AND the groceries category. And it shows that I overspent and that I'm in-debt in my credit card even though I have the resources to pay it back, so I end up budgeting for the credit card category too (let's say $100 as well). This means now that I've implicitly double budgeted $200 for groceries no? Am I just to leave my credit card category un-budgeted? 

Or did I get the idea wrong? I've been struggling to wrap my head around it and I've tried out some tutorials via YouTube but I've fallen victim to the confusion.

 

Any help, insight or solutions would be HIGHLY appreciated.

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  • Take the Credit Cards in YNAB class. But here's how it works in short:

    1. Budget $100 for groceries.

    2. Buy $50 of groceries using the credit card. Enter the transaction on the credit card account, categorized as Groceries. YNAB automatically moves $50 from your Groceries category to your Credit Card Payment category for that card. You can see clearly that $50 of your money is set aside to pay that card, and you only have $50 left for groceries.

    3. When you pay the card, enter it as a transfer from your checking account to your credit card account. Your Credit Card Payment category will go to zero, as will your credit card balance.

    YNAB works very well for paid-in-full credit card users!

    Reply Like 5
      • mamster
      • mamster
      • 4 wk ago
      • 2
      • Reported - view

      mamster Also, did you budget for your existing balance when you added your credit card to YNAB?

      Reply Like 2
    • mamster is spot on.  This is exactly what I do.  I use my Discover for all my purchases and pay the current balance at least once a week so there is never an interest due. I found out Discover reports to the credit agencies the day the statement period closes so I make sure to make the last payment the day before so my balance reported is always under $100.

      Reply Like
      • Rae
      • University Student
      • Hot_Pink_Zebra.3
      • 2 wk ago
      • 1
      • Reported - view

      mamster  I actually just tried this on an empty month and it worked just as is! I'm not sure why I've never picked this up earlier, I think because I couldn't see this feature in practice with a lot of transactions already present.

      Reply Like 1
  • mamster said:  Also, did you budget for your existing balance when you added your credit card to YNAB?

     ^ This is a critical first step in setting up your YNAB budget with a paid-in-full credit card.

     

    Rae   said:  Am I just to leave my credit card category un-budgeted? 

    Don't budget to the cc category for new purchases.  Budget to the appropriate category and let YNAB move budgeted funds to cc payment for you.  If you have old balances, budget directly to the cc to pay off or pay down over time.  The green available balance on the cc payment line is all you can send to your cc account.

    The Class or the videos on credit card handling would be a good time investment.

    Reply Like 1
    • HappyDance 

      mamster said: Also, did you budget for your existing balance when you added your credit card to YNAB?

      ^ This is a critical first step in setting up your YNAB budget with a paid-in-full credit card.

      How do I set this up? I am a paid-in-full credit card user. I am doing a refresh budget because I never figured this out and it has been driving me crazy. I link my cc and checking accounts to YNAB so they populate automatically. (I keep my savings accts off YNAB because if savings are linked, YNAB thinks I have that money available to be budgeted.) I like to go in weekly and designate expenses to the appropriate budget categories. I have my budget set up for my monthly expenses. But my budget currently says I'm overspent because the cc is linked and it has the current balance there--I will pay off the current statement balance on the due date and then next month I will be paying for the expenses put on the card this month. The only way I can figure to budget for the current cc balance and monthly expenses is to move actual money from my savings acct into my checking acct so that YNAB registers it as available money. But then my actual checking acct will always have too much money in it. Or I will have to move it back into my savings next month. Shouldn't there be an easier way to do this?!

      Reply Like
      • WordTenor
      • Your lieutenant, when there's reckoning to be reckoned.
      • WordTenor
      • 2 wk ago
      • 2
      • Reported - view

      Violet Snow Bring your savings account on budget, and budget the money to your credit card. What YNAB is telling you is that your savings is supporting your ability to pay the card in full each month, and that you don't have as much money saved as you feel like you do. If you stopped receiving income and had to pay the card, you would have to draw from that savings account in order to do so. 

      Because presumably you haven't stopped receiving income, however, note that budgeting the savings to your card does not equate to using the actual dollars in the savings account to pay for the card. You will still pay it using new income in checking, just like you always have. But you'll have an accurate number in your budget for how much money you can afford to keep as "savings" and still manage to pay your card in full. Focus on increasing that savings number over time. 

      Reply Like 2
    • WordTenor Thanks. That is true about technically using savings to pay for the cc bill each month. I will have to figure out how to budget my savings so that it doesn't look like I have that money available for my monthly budget. But I think I can figure that out.

      Reply Like 2
      • satcook
      • satcook
      • 2 wk ago
      • 1
      • Reported - view

      Violet Snow The money in your savings account needs jobs.  What is it for?  Make categories and budget it there.

      Reply Like 1
  • Hi Rae !

    It looks like everyone here was able to get you on the right track! :)

    I just wanted to leave links to our Quick Start Guide to Credit Cards and Master Credit Cards with your Budget workshop for anyone who may want to take a look!

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