Negative bank account

Greetings from Brazil!

 

As I'm using YNAB from outside the US, it is possible that I could use some different financial language , but let me try...

I am starting my budget and unfortunately I am on debt. To begin with, I am using a direct credit line in my bank account, i.e. - I have a direct bank account credit limit of 20k, of which I`ve spent 5k, in other words I have a negative balance of 5k.

In such situation, what should be filled in the bank account to be budgeted? 15k (remaining value of the credit line), zero, or -5k (limit used so far)?  

Unfortunately for the next few months I will need to continue using the bank account credit limit, and some payments should increase the negative balance.

Thank you,

Rodrigo

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  • A good general principle when using YNAB is to reflect reality as much as possible.

    In this case when you add your bank account you should make the account type "Line of Credit" and set the balance to -5k.

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    • Rodrigo
    • Dreamer
    • Gold_Packet.2
    • 2 yrs ago
    • Reported - view

    Got it, so the rationale for a bank account line of credit seems to be pretty close to a Credit Card account, right? 

    Thanks

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    • Hi Rodrigo !

      In YNAB a line of credit and a credit card are treated the same. You should create a Line of Credit account if a negative in that account causes you to be overspent in credit and not in cash. 

      For instance, if you have a Cash or Debit account in YNAB that's in the negative by -$10 and another account that has $40 in it, you'll only see $30 to budget. On the other hand, if you have a Line of Credit account that's in the negative by -$10 and another account that has $40 in it, you'll see the full $40 to budget because negative amounts on a credit account can be paid at a later date.

      Does that help clear things up?

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  • Rodrigo Faness I was reading this topic to help me with a similar situation, and unfortunately, it did not help, which I think is because non-US accounts work quite differently.

    The workaround posted here: https://support.youneedabudget.com/t/q5wlp8?r=y7wfxg by dakinemaui explains more about the issue.

    I realise the topic hasn't been touched in a year, I'm adding this just in case someone else in my situation finds it and comes unstuck as I have.

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  • Rebecca D. said:
    non-US accounts work quite differently

    To elaborate, US accounts don't typically allow the account to go negative. "Overdraft" in the US usually means a second account from which funds are transferred to keep the checking account positive. It's perhaps more accurate to call this approach "overdraft protection" rather than "overdraft".

    This is very unlike accounts elsewhere in the world which are allowed to go negative (to some limit, of course). Since the YNAB's planning feature (a.k.a., the budget) requires positive funds, someone in chronic overdraft won't get much out of YNAB by default (and it's way too expensive to be used merely as an expense tracker). The workaround for the integrated overdraft type of account provides that planning capability that is crucial to success.

    Like 2
    • WordTenor
    • I have the honor to be your obedient servant
    • WordTenor
    • 10 mths ago
    • 1
    • Reported - view
    dakinemaui said:
    To elaborate, US accounts don't typically allow the account to go negative. "Overdraft" in the US usually means a second account from which funds are transferred to keep the checking account positive. It's perhaps more accurate to call this approach "overdraft protection" rather than "overdraft".

     I would add to this that the support materials show what happens when a bank fronts the overdraft in the US (when there is no second account attached). They may allow the account to technically go negative, but they charge a hefty fee, typically $30 or so per transaction, for every transaction drawn on an account with a negative balance. If too many are made before the account is brought back positive (you have only days to do this, not years as in the case of European-style overdraft), the bank simply closes the account and sends the outstanding fees to collections.  So that's why those of you who are outside the US see support materials where there is a big fee being recorded for each transaction. 

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  • Thank you dakinemaui and WordTenor for explaining! What you explain at the end, WordTenor , is what happens in the UK if you go beyond your overdraft limit. Presumably ditto in Germany, but I haven't "experimented" with that "feature" yet!

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