Completely confused on handling credit cards and interest
I'm trying to get my mind wrapped around the issue of credit card payments and interest when you carry debt. I'm new to YNAB and this just is NOT clicking for me.
Say I have credit card A with a $1000 debt. I want to make a payment of $50, so I budget that amount. The payment is made and it shows my debt as being reduced by $50. The next day, I get interest added to my account of $10.00. YNAB wants me to anticipate that I'm getting this interest charge this month, after my payment has been made, and to budget for it with dollars I don't yet have.
What am I missing?
You need to then budget for the $10 interest charge. The money needs to come from one of your other categories. You don't need to necessarily anticipate this amount (although carrying a balance, you will have this regularly). Once you have a bit of history with YNAB under your belt, using the Reports feature to see what you have usually budgeted is helful. Or, click on the category itself in your budget and you can see in the side bar the average budgeted, average spent, budgeted last month, target balance etc.
Hi Coral Chef ,
You can handle that interest in two ways, which have both been touched on above. You can budget $50 towards your credit card category directly, and let the interest category remain yellow and negative (that carries over on your credit card balance), or you could budget $40 towards your credit card category and $10 towards your interest. Either way will still place the full $50 towards your credit card, it's just covering that Interest in its specific category rather than in the credit card category.
For more information, our Help Docs will walk you through how to account for interest charges when you're carrying a balance on a credit card. :)