Classify credit card account as checking account
This is an idea I haven't thought through yet, but wondered if anyone else might have tried...
I am so tired of trying to understand YNAB's credit card handling & make adjustments that seem messy & complicated (e.g., getting a return both correctly accounted for as a CC refund & having the $ assigned back to the right category).
I wondered if it would be easier if I simply set up my credit card as a checking account instead of a credit card account? I don't import transactions, so no concerns there. It seems to me I could still track all my transactions, correctly categorize them, and simply pay off my bill at the end of each month as I currently do.
Seems too easy to work, but wouldn't it? Can anybody see any problems with this?
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If you are carrying credit card debt it can be a problem. If you are a 100% paid in full user (ie can you pay all of your credit card bills in full right this minute and not have to adjust any of your categories?) it's not a problem. You need to rename your existing credit card account something else. Then create a checking account with the credit card name. Then you select all the transactions in the old account and click on the edit menu. From there you select "move to account" and move them to the new checking account. After that you close (not delete) the credit card account.
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jenmas Hi there! I attempted to follow the method you outlined here, but ran into a problem: after disconnecting the credit card, setting it up as a new "checking account," and moving past transactions to the new "checking account" - when I went to import new transactions on that "checking account," it imported ALL my historical transactions again, so they were doubled in the system. Is there a fix for this?
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Steel Blue Horse I do 100% manual entry so have no idea how to deal with direct import.
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Thanks for the quick reply, Jenmas.
I have a couple of questions:
DEBT:
I pay my CC at the end of each month, & pay whatever current total the CC company shows in my account online. (So I'm paying the current total, not the statement total.) However, I generally don't pay for pending items (things I know I've bought that aren't yet shown online), and I have an auto-transfer set up to pay the CC bill from my checking account, and I can only update the amount I want to pay up to the last 2 or 3 days of the month, so there is sometimes a charge that's shown in the account online that I haven't included payment for. Is that close enough to being a "100% paid in full user" to not cause me problems with credit card "debt"?
ADJUSTING CATEGORIES:
When I buy something on my CC, I record it on the Account page, and then immediately check the Budget page to see if I need to cover any overspending (i.e., move $ from one category to another.) If so, I make that adjustment immediately.
Sound okay?
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I have implemented the cc masquerading as a chequing account methodology in my budget. I set up my paid-in-full credit cards as chequing accounts. How do I know how much to transfer to my cc account? From my cc statement and from the number displayed in my cc account on my YNAB list of accounts. So simple. Whether you pay the balance in full or the statement balance in full, it will not affect the budget screen or your budget categories.
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Thank you, HappyDance!
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Sea Green Sun (ccf0a561a083)
I should probably add that I know I can pay my cc balance in full whenever I like because...and this is the critical part....I never let a category stay overspent and I never let my TBB go overbudget. Since there is no red on my budget screen, I am confident that paying my entire cc balance in full or the cc statement balance in full at any point in my month will not leave me short for my essentials or cause me cash flow timing issues.
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Sea Green Sun (ccf0a561a083) said:
I pay my CC at the end of each month, & pay whatever current total the CC company shows in my account online. (So I'm paying the current total, not the statement total.) However, I generally don't pay for pending items (things I know I've bought that aren't yet shown online), and I have an auto-transfer set up to pay the CC bill from my checking account, and I can only update the amount I want to pay up to the last 2 or 3 days of the month, so there is sometimes a charge that's shown in the account online that I haven't included payment for. Is that close enough to being a "100% paid in full user" to not cause me problems with credit card "debt"?That's what I mean. I only ever pay the statement balance but if I wanted to I could pay the total cleared plus pending balance at any time. However there are many people who have never paid a penny of interest in their lives because they always pay the statement balance, but they can only do that after a paycheck has arrived - that's living on the credit card float.
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+1 for setting credit card accounts up as checking accounts. Like you I struggled with how YNAB handles credit cards and was often frustrated. Converting them to checking accounts will result in them working like YNAB 4 did with the added benefit of all over spending being red and under funding being yellow.
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Thank you all for your input. I'll be changing my CC accounts to chkg acccounts today & am looking forward to no longer trying to follow YNAB's torturous CC handling!
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Just an update. I changed my CC accounts to checking accounts (you can find instructions somewhere in the forum - as I remember, you set up a new chkg acct, transfer all the txs into it, and then delete the CC acct). I did this a month ago and it's SO much easier I can't even imagine going back to using YNAB's CC scheme. I have found NO downside to doing this!
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Sea Green Sun (ccf0a561a083) (and any others doing this) Hi - I'm getting ready to make this switch, and just FYI I do use the import function and i do pay off full balance each month. A couple qs:
- did you run into the issue of duplicate transactions after moving the transactions from the old CC account to the new "checking" account? if so did you just delete one of each?
- how do you categorize payments into the CC account (ie, for full balance at end of month) -- my sense is the payments should be deleted, since we are pretending this isn't a CC?
- relatedly, does your new "checking" account always have a negative balance since there's no inflow (assuming you delete CC bill payments)?
Thanks for any help anyone can provide.
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Orange Vacuum
No. You don't delete your payments. The transfers from your chequing account to your cc account (which you've told YNAB is another chequing account), will continue to be just that - transfers. Just as transfers from chequing to savings appear in both registers as transfers.
The credit card payment category on the budget screen will disappear. If you budget for all transactions before you spend, then you don't need YNAB to tell you how much you can transfer to your credit card. Because all your cc purchases are always backed by cash in your accounts before the purchase, that means you are always in a position to pay the entire statement or balance on the card at any time.
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If I change my credit card to checking, will it still import transactions from my bank if I connect it to the right account? Has anyone tried this?
(Long time YNAB4 user trying to transition to nYNAB and after several painful days I'm wondering why I'm still trying.)-
Alice Blue Piccolo Yes, it will.
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nolesrule Thanks for your super fast answer! I'll give it a try.
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Will this still work if I'm carrying a CC balance? I'm also having trouble figuring out how the CC's work. Everything else is right on, I love the visual input of where the money is. YNAB is going to get me back on track.
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Ivory Dragon
No. Not without creating an even more complicated work around to figure out how much debt you are carrying and how much you are paying towards retiring the old balance. The best tool for paying down an old cc debt is the YNAB cc payment tool.
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Why not simply create categories for each of your credit cards, create a monthly spending goal as the amount you plan on paying down. Track the balances on your own as often as you need to.
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Shawn That works for credit card debt, but it gets tricker if you have credit card debt but are actively using the card at the same time.
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I also did this. Otherwise I would have left YNAB as the info they show for credit cards in the budget is totally useless and never what you actually want to see, and they try to tell you when you last paid, and with a new account it's totally off. And there were so many other problems.
Checking Account saved YNAB for me.
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Thank you for this thread. It took out all of the confusion that Credit Cards create for those who pay off in full each month.
One question for everyone out there, how do you make sure that you have enough in your checking each month? My problem right now is I actually have a lot of my money in my checking account (this month and part of next month's expenses). I'd like to move some of it into a higher yield money market account, but I'm not sure how much i can move and how to make sure I don't overdraft from my checking.
It's because of this reason above, I haven't added my other checking and savings accounts which I do not use for monthly payments. I think adding them they would help me towards budgeting for the future though.
Any advice is appreciated!
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Slate Blue Unicorn
That's a cash flow timing question. My process is this:
At the end of each month/beginning of the next month, as I'm setting my budget for the new month, and after my salary is deposited, I ensure I leave the following amount in chequing:
- my average monthly spend (from YNAB income/expense reports), +
- any big irregular expenses scheduled/planned in the next 4 to 6 weeks, +
- $1,000 (my preferred minimum account balance for flexibility).
Last year, I made an impulse decision to buy a yearly gym membership, and that was the only time I had to transfer from savings back to chequing. The rest of the time I could see what was coming well enough to decide whether or not to bother transferring to savings. Usually, I transfer whatever is in excess of the formula above.
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Slate Blue Unicorn If you always pay credit cards in full, and budget is well adjusted to your income (you don't spend more than you earn), you should never have a problem. By definition, you won't be spending money you don't have, so when the time comes to pay credit cards you will have enough money to do it.
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Entering a Credit Card as checking account really is the easiest way to manage the account. The operate the same way except the money stays in your checking account a bit longer. The advantage are the protections of a credit card and also rewards you can get.
Let me explain.
You budget $100 for a purchase in your checking account.
You can either spend the budgeted money by check , by debit card , by cash, or on your credit card.
If you go the credit card way, then $100 is charged to your credit card. The money to pay it is sitting in your checking account until the monthly automatic payment hits.
$100 is move from checking to the credit card, and you accounts are all balanced.
If you are like me , you get a 2% higher cash back reward for using the credit card. I usually count that money as income in YNAB, though sometimes I'll categorize it another category to offset spending.
If you are adding a new account, then select "checking" for the account type when you are adding it.
If you are switching an exiting account from credit to checking,
Unlink the credit card account
rename the credit card account to <name>-old
add the credit card account like I explained above, as a checking account.
Move the transactions from the -old account to the new checking ( grin ) account .
Move scheduled transactions, if any, to the new account.
Done!
YNAB has a very complicated system for handling credit card accounts, it's best to avoid it unless you like high blood pressure.
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ikomrad Hello
I have been using YNAB for several years and ever since I migrated to nYNAB, their method of handling CC 'is' giving me high blood pressure.
I too pay all my 3 credit cards in full on every due date. Its an automatic transfer from my main savings account (I don't use cheques) to my credit card.
I am in Australia so all my YNAB accounts are manually reconciled on a weekly (every sunday) basis against my online activity balances for credit card and savings account . I print my CCs activity statement and savings account statements every sunday too.
I have 3 credit cards setup as CC and its doing my head in. Are you saying I can simply go into YNAB now and change my existing 3 CCs into 'Checking Account'? Or I have to create new accounts? I then move (how) all transactions from the old CC accounts into their respective new checking account? That's all?
Thank you
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souwalker1 You choose the account type when you add it, and you cannot change it. I think the easiest way to disconnect the cc account from the bank. then create the new account, selecting "checking" as the account type. Then you would closed the "old" account. it will prompt you to assign transactions to another account if the balance isn't zero.
It's been a while since I've done it, but that is how I remember the process. You might want to do a test run to make sure .
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ikomrad I don't think YNAB will let you close a budget account unless it has a zero balance. But it's easy to highlight the transactions and move them (using the Move function under the Edit menu at the top of the register) to the new account.
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ikomrad what do you mean by disconnect cc from bank? I do all entries and transfers manually in ynab.
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ikomrad
- Add a new checking account to move to.
- Select your CC account you are converting.
- Select all transactions in your account. (Top left check box.)
- Select Edit and choose Move to Account->new checking from step 1.
- Close the old CC account.
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I do this, but its because I never carry a balance on my card. I basically only use it for certain purchases where my CC gives me cash back, or for situations where I need a proper CC (e.g. deposit when renting a car). 95% of the time, I pay the balance on the credit card the same day I make the purchase (the payment to my credit card often even clears before the purchase itself). The only exception is that I need to carry a balance of at least $30 each month for a period of 24 hours to have the monthly card fees waived. So with the first purchase each month, I let the card charge clear and then wait 24-48 hours before I pay it.
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Forest Green Stallion Why not hold onto that money and pay the statement balance in full before the due date one time every month? Or do you just prefer to let that money work for the credit card company instead of working for you in your own bank account as long as possible?
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bevocat This is what I've been doing for months now. My four CCs are set to pay the statement balance on the due date, and their respective scheduled transactions in YNAB remind me that they're happening. It's a ''set it and forget it" process that has made life a lot easier.
I do have a question about whether or not this is considered "riding the float" and if so, why do some people imply that's a bad thing? Maybe I just infer that, but I'm still in doubt if it's the best practice. At all times, my available amounts equal my CC balances, so I know I could pay them off in full at any time. None of the cards offer an "automatically pay balance in full on due date," or I might consider that, but as you said, why dispense with cash before you need to, even if, in my case, it amounts to a relatively small total. Since these cards are in constant use, it makes no sense to try to hit zero balance just for the sake of seeing zeros, since in a day or two there will be other transactions that will change that zero to something else. I don't see the point of paying every time a transaction posts, or nearly every time.
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JoeDid It's only riding the float if you cannot pay the cards in full down to 0 at any moment in time. For example, if you always pay the statement balance but can only do that once a paycheck has come in is riding the float (ie statement cycle closes on June 2, due date is June 28 and you can't pay until you get your paycheck on June 10). It's possible to ride the float forever and never pay a penny in interest. However, one unexpected expense or direct deposit snafu and suddenly you've got interest accumulating on your account.
Choosing to pay only the statement balance on the due date is not riding the float if 100% of the funds are allocated to the credit card payment category and you just aren't sending 100% of the funds off this second.
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JoeDid You're only riding the float if you couldn't pay them off in full at any time.
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monkeyhanger and jenmas
Thanks. I suspected that was the case but wanted the clarification you provided.
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JoeDid Nope, you're doing it exactly right!
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JoeDid I like the idea of creating scheduled transactions so that I remember the payment date. Thanks for the tip!
Quick follow up questions:
1. Do you set a dollar amount in each scheduled transaction or just leave them at 0 and then set them when the transaction date hits?
2. What is the screenshot that you are showing? Do you have budget category for each credit card?
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Slate Blue Unicorn I have recurring transactions for my credit card payments. As soon as the statement is available, I enter the dollar amount. In the memo section I enter the date of the transaction so I know that it's up to date. Also, if there is a payment that goes out today and next week I see a transaction in the scheduler that says 5/29 in the memo section, I know that the amount listed there is not up to date and will need to be edited before the 6/29 payment goes out.
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Slate Blue Unicorn For CC payments, which are automatic and scheduled, but which vary, I leave the scheduled payment amount blank but I have a memo field that says "AUTOPAY STATEMENT BAL: ENTER AMT--->". As soon as I receive the electronic statement, I enter the statement balance from that. When the transaction updates for the next monthly payment I remove the amount in the scheduled transaction, so it's once again blank, which tells me I need to update it when the next statement arrives.
The screenshot is my budget page, showing the Credit Card Payments master category, showing each sub-"category" for each card (which is actually the CC account itself.) Those were set up when I created the CC accounts.
And for the record, I might be an anomaly, but I decided to switch my CCs back to actual credit cards, after having converted them to checking accounts, because I like that true payment function, and I have had absolutely no problem with them.
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