Handling CC interest that charges AFTER monthly payment
Hey all! I'm curious to know how the rest of you handle this situation. As CC periods often don't line up with the month exactly, interest is usually charged later in the month AFTER my monthly payment. I'm currently using the snowball method to pay off my cards. This means I only have enough budgeted per month to pay the minimum on all but 1 of my cards. When the interest drops and goes into the interest category, I now have an underfunded category for the month. I understand the YNAB philosophy regarding credit cards but I find it difficult for me to implement.
Budgeting for interest can be a bit difficult since it always happens after your payment posts (when carrying a credit balance).
If you don't already, create a budget category called something like "Interest Owed" or "Interest and Fees".
Your credit card account should provide your "payoff" amount; the amount you'd need to pay at once to bring your account to zero. If you subtract the credit card balance from the payoff amount that should roughly give you your interest amount (possibly not exact though). For example, if your credit card balance = $2000 but the payoff amount = $2200, that difference is the $200 interest owed. This $200 is what you'd need to budget in your Interest category for the month.
You can also use the previous month's interest as your current month's interest budget. So for example, what I paid in December interest would get budgeted in an Interest Owed category for January, since my overall balance was always decreasing.
As long as your overall amount owed is decreasing (you're not adding more debt to it each month), then your interest owed will also decrease a little each month, and you should come in under budget.
CC interest is always charged on the statement closing date, and you should have money Available in the category by that day. It's no different than paying any other bill.
If you're incurring interest, you should also know that waiting until the due date to pay incurs more interest than is necessary. You might consider making payment as soon as the Available amount increases (even several during the month if you're using it for purchases).