Tracking Credit Card Spending with non-traditional payment cycles
I use a credit card for the majority of my everyday purchases to earn valuable rewards. I never carry a balance, and make sure I pay off my statement balance every month.
Currently I have my credit card account as an "off-budget" account. Every so often I track all of the purchases on the credit card, aggregate them into their respective categories, and then pay out of my on-budget checking account to the credit card in one lump payment that is broken out by category. As the month progresses I update the pending payments to get an idea of how much I'm spending in each category, as a result transactions I make in late February will be due for payment in April. While this approach works, it's less than ideal.
I read in another post that others use their credit card as an on-budge account and track transactions normally in the ledger to that account, then when time comes to pay the bill they transfer between a checking account to the credit card category-free.
While this works at the onset there is a major problem I'm running into - which is the timetable for payment. Transactions that I make after my closing date of February 17th will be due for payment in April - that's the month where I want all my spending to deduct from since that is when the money is due and where I want to make sure I'm not overextending.
The only solution I could think of is to post-date the purchase days so they correspond the correct month but this seems wonky. Was wondering if anyone had a better way to handle this or found a better practice.
Using YNAB 4 btw.
Maroon Clarinet said:
Currently I have my credit card account as an "off-budget" account.
There's your problem right there. The CC is merely another method of payment, so treat it as such. You need to come to grips with the fact you're spending when you swipe the card, not when you transfer money to the CC.
There is no issue with payment timing because purchases should be budgeted. Money then sits behind the scenes (in YNAB4) just waiting until you get around to paying the bill, typically 4-8 weeks after whatever charges you made.
At all times, the amount you have implicitly reserved for your payment -- the maximum amount you can send -- is the difference between account balance and Pre-YNAB Debt category balance. If the latter is $0, then you can send the entire account balance should you wish -- i.e., paid-in-full status.
I see what you are saying - I'm trying to move away from having the CC as off-budget to make tracking more efficient and less of a hassle.
So if I'm understanding correctly it would go something like this,
I've budgeted $500 for groceries for the month of March. As I purchase groceries the balance on my CC account begins to fall into the negative, while at the same time my Grocery category eventually falls to $0. At this point I either curtail spending or move money around, whatever. That $500 I've spent in March is going to basically sit in my checking account until I pay the bill in May, where I transfer it from 1 YNAB budget to another - keeping everything in check?
Great - that's how I've been treating the cash accounts - doesn't matter where the actual funds are sitting, as long as there is enough to cover the purchases out of the account and the budget is in check it's all good.
You mentioned that the maximum amount I can send is the different between account balance and the Pre-YNAB Deb category balance. I noticed when running through some test situations that as I input charges out of the credit account, they are debiting from the category that I assign them - but the Pre-YNAB Debt balance for the card is not incrementing - is that expected behavior?