New Credit Card handling a major philosophical change?

As with many other people here, I have been stumped by what is going on with this new credit card situation.  I have been using YNAB since 2008, so I was thoroughly trained in the ways of old.  I switched over to the new YNAB right after it came out, and ever since then, credit cards have become a mystery and a confusing mess.  Because we have been budgeting for so long, I just ignored it with the logic that "we always pay our bill in full, and use YNAB to budget everything, so I don't care what is going on behind the scenes, I assume it will work out in the end."  Now this pretty much works for us since we are now high income earners with a healthy bank account, but when I have tried to get new people on board with YNAB, credit card usage becomes an nearly insurmountable issue that doesn't make sense and I can't explain.

So when we started with the new YNAB, I entered the starting balance, and then budgeted that exact amount into the credit card category.  "Done" I thought, "now I can never look at this category again, and just let the bill auto-pay as normal, and never have to worry."  I mean, I had been doing that for years with great success- really one of the main selling points for YNAB to the many people I have told about YNAB.

Well, fast forward about a year or so, and I'm noticing that the CC category seems to be WAY off.  How is that possible? We categorize all the spending on that card into our budget and pay it off automatically.  How could YNAB be getting it wrong?  I must have messed something up when we started it.  So I just told it to cover the over spending with "to be budgeted" money.  Fixed! Time to get back to stress free budgeting.  Except... its wrong again. I have a big negative balance here again.  WHAT?

It didn't seem confusing when I read about it during the change over, money that is spent on credit card from one category gets moved to the credit card category for payment.  Seems simple, but its not clear how that is done- it doesn't change the budgeted amounts in those categories (this is how I would do it if I was moving money from one category to another manually), instead it jut changes the balances of those categories- weird, nothing else works like this in the budget. Hard for me to see if its working right or not.  But I can see that something is wrong, so lets keep exploring.

I cannot be sure what is going on, but here is my guess, and I hope that I am wrong.  For years we have always had areas of overspending (who doesn't!).  One of the basic principles for long term success with budgeting is to keep it simple.  So if we are over budget on a few categories (i'm looking at you groceries, and kids clothing) instead of going in to each category and fixing them, we let it role forward, because YNAB is smart enough to know that when I overspend that money is GONE, and it takes it away from what I have to budget next month.   I believe what is going on now is that money that is overspent, but covered by credit (which it now has a special indicator for), instead of pulling the money to cover that from my to be budgeted, it gets it from the credit card category, and just lets me know in that category that I am now overspent.  And it seems like it may even let a negative balance carry forward?  I'm not sure, again, super confused at this point, no other category works like this.  I HOPE that I am completely wrong here, because that would indicate a huge shift in philosophy away from only spending money you HAVE to "as long as you got credit to cover you, your good."

Again, I hope I am just confused, because this would be madness to have done this.  However, even if that's not whats going on (and, again, I have to believe I'm wrong), I believe that this new CC system is a mistake at a philosophical level.  The previous implementation for credit cards treated money spent on a card as MONEY SPENT! Technically inaccurate because in fact you simply created a debt for which you have the money to pay, but haven't paid yet.  Accounting wise it was inaccurate, but as far as BUDGETING goes, it was exactly correct.  If I have a $100 bill, and I owe you $100, keeping track of the debt obligations, and the location of the $100 bill are important accounting tasks.  But when it comes to deciding what to do with the money I have, the only important information is that I have $0.  It is exactly this simplification that I believe has been the root of YNAB success.  And loosing this in order to gain a small degree of accounting accuracy, and giving those who want to, the capability to keep spending on credit, seems ludicrous, and completely against the founding principles of YNAB. 

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  • Your suspicion is correct, Fusi0nCatalyst .  Unaddressed overspending in cash accounts self-corrects in the next month by subtracting any negative or overspend amount from inflow.  Unaddressed overspending in credit card accounts increases debt. YNAB now assumes you mean to carry debt and doesn't self-correct cc overspending. Previous versions of YNAB required you to do the entry necessary to carry debt. The web version does the opposite. To deal with cc overspending from prior months, you must budget directly in the cc payment category, then only transfer the amount available displayed in your cc payment category when paying the card.

    Like 2
  • Fusi0nCatalyst said:
    So if we are over budget on a few categories (i'm looking at you groceries, and kids clothing) instead of going in to each category and fixing them, we let it role forward, because YNAB is smart enough to know that when I overspend that money is GONE, and it takes it away from what I have to budget next month. 

     I'm going to assume you mean overspent and not over-budget,  but this is probably your problem.  YNAB does not subtract credit card overspending in the following month.  Instead, it assumes you intend to grow your credit card debt.

    I believe that this new CC system is a mistake at a philosophical level. 

    I completely agree.

    The crux of the philosophical disagreement:  You consider the money "spent" the moment you've made a purchase with your credit card.  YNAB doesn't consider the money spent until you've paid back your card issuer.

    I think your perspective is a much healthier one that any responsible budgeter should adopt.

    Like 2
    • Patzer
    • Retired at age 60. Thank you, YNAB!
    • Patzer
    • 2 yrs ago
    • 2
    • Reported - view

    Fusi0nCatalyst

    This is the same philosophical change I tripped over when I started using nYNAB.  Previously, YNAB had been a net cash budget:  What I have to spend is the net of checking, savings, cash, and credit cards.  The new YNAB is a gross cash budget:  What I have to spend is the sum of checking, savings, and cash; and I am expected to budget for the credit card payment.

    While that is a philosophy that I believe is inferior for budgeting, there's another issue you're running into.  If you could indeed budget for the initial balance and have everything take care of itself behind the scenes, it would be easy to ignore the inferior philosophy and just let the program do things.  However, as early as 2016 users and testers identified 8 situations that would make the card payment category and the card balance diverge.  I believe 5 of them are bugs.  Another one is failure to budget for the initial balance, which you knew to avoid.  The last two are overspending a category, which YNAB assumes means you want to add to debt; and transfer to another on-budget account (e.g., purchase a gift card that you will track as you use it), which YNAB assumes means you took a cash advance with the intention of adding debt.

    It is possible to learn all the ways the category and the card balance can diverge, and take action on the budget page to correct the situation each time this happens.  That reminds me of having a toilet that keeps running, and going to jiggle the handle so it will stop.  I'm only going to do that so many times before I take the lid off the tank and try to fix the mechanism so I don't have to do that any more.  In the case of YNAB, the fix that I found was to tell new YNAB my cards are actually checking accounts.  Then the initial balance categorized as negative TBB reduces the amount I have available to budget, I just pay the cards in full every month, and nothing ever gets out of sync.

    In Podcast #341,  Jesse makes the case for why the credit cards work the way they do in new YNAB.  Essentially, the idea is that someone who is living paycheck to paycheck and suddenly needs to have an expensive transmission repair puts it on the card, living with the added debt.  YNAB helpfully adds debt smoothly for this scenario, at the cost of annoying those of us who are nowhere close to that situation.

    Like 2
  • Patzer said:
    In Podcast #341,  Jesse makes the case for why the credit cards work the way they do in new YNAB.  Essentially, the idea is that someone who is living paycheck to paycheck and suddenly needs to have an expensive transmission repair puts it on the card, living with the added debt.  YNAB helpfully adds debt smoothly for this scenario, at the cost of annoying those of us who are nowhere close to that situation.

     I remember hearing that podcast awhile back.  I understand the need to make YNAB work for people on the edge, after all, its those people who are just starting YNAB, and know the least about how to use it.  It needs to work robustly for those situations.  I GET IT.  HOWEVER... This new philosophy makes it easier for these people by just allowing them to continue operating as the did before- have a problem? no big deal, throw it on he credit card.  I am a MUCH bigger fan of a solution that requires someone to actively go in and create debt.  Make it an extra step!  Make it simple and have good instructions, sure, but don't make increasing debt the default functionality.  Overspending in a category needs to be covered by other money you have.  If you can't do that, you are going backwards.  Sometimes that might be the only option, but in those few cases, it should be extra work to implement in the budget.

    Honestly, this is a HUGE disappointment to me.  This is so against everything I am trying to teach people when I get them on to YNAB.  I have had a few people I got on to YNAB 4 ask if its worth the upgrade.  Given this information I can now definatively tell them that YNAB 4 is a superior product, and they should continue using it until the YNAB team figures out how to get this right in the new YNAB.

    However, your suggestion about changing the card to a banking account sounds great.  Are there any details I need to know to do that? Can I just swap the account type somehow, or do I need to make a new account, and unlink the current one from the CC account?  And if I do make a new one, can I link a bank account to the credit card company?  I assume it doesn't care that its a credit card company and not a bank?  Thanks so much for the help.

    Like 5
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
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      Fusi0nCatalyst said:
      However, your suggestion about changing the card to a banking account sounds great. Are there any details I need to know to do that? Can I just swap the account type somehow, or do I need to make a new account, and unlink the current one from the CC account?

       

      Fusi0nCatalyst 

      I didn't like the clutter of the card payment category, so I changed my credit card account type to checking in YNAB 4 then re-imported when I started nYNAB.  There is no facility for simply changing an account type in nYNAB.  Others tell me this process works:

      1.  Rename credit card account, e.g. "Visa" to "Visa - old"

      2.  Create new checking account.  Call it "Visa"

      3.  Select all transactions in "Visa - old" and move them to "Visa"

      4.  Wait for the software to catch up.  Depending on how many transactions there are, this could take a while.

      5.  Delete the empty old account.

      I don't do direct import, but I'm told that it still works on credit cards set up as checking accounts.  I'd guess that the safest thing to do would be to unlink the old account before moving transactions, then link the new account after moving the transactions.  I don't know if something strange happens with Direct Import when you link the new account, but if it does I'd expect it to be a one-time event.

      Like 2
    • Patzer how do you move "all the transactions" to the new "checking account"?

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
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      jillFearing 

      Turn off all filters.  Select all transactions in the account.  Right-click on any transaction, and select "Move to Account."  Select the account to move them to. 

      If there are a lot of transactions, the important thing is to be patient while the system catches up.

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    • Patzer Thanks so much for your help!

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  • bret said:
    The crux of the philosophical disagreement:  You consider the money "spent" the moment you've made a purchase with your credit card.  YNAB doesn't consider the money spent until you've paid back your card issuer.

     I've tought some personal finance classes, and this is a major part of the change in thinking I am trying to get across. I don't care HOW you spent the money, once its spent, its gone.  Credit cards function just like cash or debit cards in this way of thinking.  I am very disappointed to hear the YNAB no longer supports this idea.

    Like 4
  • Fusi0nCatalyst said:
    However, your suggestion about changing the card to a banking account sounds great.  Are there any details I need to know to do that?

     You won't have an easy way to represent debt inside your budget anymore.  (Not a problem if you don't have any debt and never expect to.)

    Can I just swap the account type somehow, or do I need to make a new account, and unlink the current one from the CC account? 

    Make a new account and choose, "Checking". You can move your old transactions en masse from the old account by selecting all, edit, "move to account ->".

    And if I do make a new one, can I link a bank account to the credit card company?

    Yes, you can still link a credit card account to enable "direct import" even if you've lied to YNAB and told it  that it's a checking account.  I do this with three different credit cards (US Bank, Citi, and Amazon Prime Store Card) and it's worked beautifully.

    Like 2
      • dakinemaui
      • dakinemaui
      • 2 yrs ago
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      If you ever need to carry a balance on a card, you can simply make a "balance transfer" to a real CC account (and then back once you've restored PIF status). There's really no downside to representing your paid-in-full card as a checking account.

      Like 2
    • bret When changing a credit card to a fake checking account, how do you delete the old account once you have migrated the items? All I see is "close the account" and when I select that it tells me that I have to cover the payment amount.

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    • jillFearing I figured out that you have to delete all the transactions in the old account after you move them and then one of the options is delete the account.

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  • bret said:
    I'm going to assume you mean overspent and not over-budget,

     YA.  language issues I guess, I meant we spent over what we had budgeted. we went "over budget," not that we budgeted over what we spent, "over budgeted."   

    Like 1
  • Fusi0nCatalyst

    Defining my cc accounts as chequing accounts simplified things for me.  But it really is not recommended for people who carry debt or who live on the float.  You mentioned that you frequently overspend some categories on credit cards and then let the budget self-correct in the next month.  Do you do this because you live on the float (unable to pay until after receiving income) or because you are trying to impose a set monthly amount despite fluctuating expenses?

    It would probably be a better methodology to adjust your budgeted amounts to cover the overspending in the month you spend rather than let the budget fix it on rollover by reducing your income in the next month when you are sending your payment.

    Like 2
  • HappyDance said:
    Do you do this because you live on the float (unable to pay until after receiving income) or because you are trying to impose a set monthly amount despite fluctuating expenses?

     We do this for simplicity.  The easier budgeting is, the less stress it causes, and the easier it is to follow.  So groceries are a category that this happens in frequently, but since we do nearly all of our spending on credit cards, this happens in many different categories of the course of time- never a "normal" month, as Jessie would say.  We could afford to spend twice as much on food if we wanted, but that is not what our priorities/values are, so we try to keep groceries to about $500.  Frequently we will go over this amount, and we SHOULD go in and adjust at the time of overspending, but the reality is, we have a pile of money sitting there for next month, and we use to just let the budget self fix the issue, and just move on with next month budget.  It was easy to go back and review how well we were doing staying under the budgeted amount.  In the past we use to have a $350 food budget, but we were going over basically every month, so that wasn't a realistic number. We moved it up to $400, then $450.  As the kids get older, it cost more to feed them.  We since adjusted it up to $500, and now are typically in line with that. (however, for a variety of reasons, we went over by $250 last month).

    Thankfully over the past 10 years of using YNAB, our income has risen dramatically (both my wife and I finished school, which obviously makes  a huge difference), but using YNAB we have been able to keep our lifestyle decisions in line with our long term goals, so we have plenty of cushion in the budget.

    But its very concerning and frustrating to me that our budget no longer considers money spent as money spent.  In the old YNAB, creating debt was something you needed to actively go in and do.  If you wanted to create credit card debt, you really needed to go in and budget a negative into the credit card category, and then turn the arrow to the right and let the debt carry forward, and then manually go add the new interest every month.  A process that required a conscious decision to do, and work to keep up with. Now you just spend money on your card, and YNAB say "Oh, looks like you fine, we will just go ahead and increase that CC debt for you, no worries, you don't even need to think about it!" Its like, why are we even budgeting?  Lets just use Mint to track what we spent, its free, and also doesn't really care if we are actively engaging in budgeting, or racking up debt.

    Like 5
  • I agree , this new method of handling credit cards now CREATES work and confusion for those of us who pay credit cards automatically monthly.  I've never ever had to concern myself with the automatic monthly full payment and you've now gone and made that an integral part of the product!  Why not create an option when a user opens a new budget that allows backwards compatibility in terms of behavior for long time YNAB4 users?   Surely you could put a toggle on credit card accounts to allow the users to chose how they behave? 

    Forcing this kind of change, which is utterly pointless and totally annoying for monthly credit card users, is a great way to alienate your user base.  Instead of being able to import my YNAB4 budget, I've had to start again which has cost me HOURS of my time only to find there is some dodgy hack to trick the software into behaving almost like it used to (I still can't roll over overspending into the next months category - nYNAB makes ME MANUALLY adjust the budget)!  There is NO way to import my old budget with years of history unless I want to go back through everything and manually adjust years of minor overspends!  To top it off, I get to pay for the privilege of all of this? 

    In fact, I'm still on the fence if moving to nYNAB is worth it, really the only reason I'm trying it is for the mobile app so my wife and I can keep in sync and it seems there are a number of free apps that do this too. 

    nYNAB has really lost the plot on this one.

    Like 2
      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 2 yrs ago
      • Reported - view

      Cyan Wildebeest point of order: you do not need to adjust anything but the current month when you migrate your old budget.  Square up the CC payment category and correct the TBB and you are set. 

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    • WordTenor   I have five years of budgeting in YNAB4, when I import that budget every single month with an overspend is now in need of correction.  It's a mess and fiddling with the last month doesn't fix up the history.

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      • jenmas
      • jenmas
      • 2 yrs ago
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      Cyan Wildebeest I don't believe that @WordTenor meant that the past would be fixed. Just that if you want to be able to move forward, all you have to do is make sure the current month is correct. The transaction history will still be intact in the past even if the category balances are a hot mess.

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      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 2 yrs ago
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      Correct. The thing that matters for history are the transactions, not the budgeting.  So you don’t need to go back and correct all of the budgeting, you can just correct the budget in the current month and move forward. 

      Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Cyan Wildebeest I've done many, many budget migrations from YNAB4. I haven't upgraded so I'm always doing new trial accounts to play with updates. All you need to do for cleanup effort  is update the current month. There's no need to go back and adjust all of the old months.

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    • nolesrule I followed the suggestions in this thread (thanks!) and although it's made a complete mess of the migration month, everything is almost lined up for the new month and onwards.

      That said, it's still a terrible hack - the ability not to be able to roll over negative balances still bewilders me.  If I have enough of a balance overall, then it doesn't matter if I overspend or borrow against the next few months spending, which happens when you buy in bulk to last a few months or if you have an average budget line for things like power bills which naturally vary with the season.  Now I have bake all of this into the previous months overspend and reduce my budget lines MANUALLY.  It's also obscure and completely non-intuitive.

      Some of the budget amounts have now gone negative in order to clear up enormous positive category balances created on import as all of my previous month roll overs had disappeared.  Since I'm in an overspend month I'm faced with another negative budget line next month and it's not clear to me how this will ever shake out and correct itself.

      I can't for the life of me figure out why YNAB would basically say FU to it's existing users and completely mess up years of budgets.  It's totally unnecessary and could easily have been avoided by a simple toggle in the behavior - maybe even restricted to users migrating from v4.

      After a day of frustration I'm now back and underway, but I'm still left scratching my head as to what the point of these changes really were and whether I want to be charged monthly to use something that now doesn't really work for the way I budget (which was the way that I learned from YNAB4).  I'm also torn as to whether I want to reward YNAB with a monthly sub when they made this such a complete PITA to migrate and basically broke what was a good product.

      The best thing about all of this has been the help on the forums, funnily enough that came from users rather than the vendor.

      Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • 1
      • Reported - view

      Cyan Wildebeest 

      Cyan Wildebeest said:
      If I have enough of a balance overall

       The problem is that people were using that feature whether they had enough money overall or not. And the simple fact of the matter is that it's a violation of YNAB Rule 1.

      Not saying I disagree with you. Just giving the reasoning behind it.

      Like 1
      • jenmas
      • jenmas
      • 2 yrs ago
      • Reported - view

      I agree with at nolesrule . Right now I have a negative category of $35 because someone owes me money and if history is any indicator, it could be 9 months before she pays me back. But the mere fact of that red category means that every other green  category is inherently inaccurate. However since it is only 0.06% of my budget, if this inaccuracy actually impacts my budget, something much bigger is going down than some minor budget issue. 

       The red arrow was really only supposed to be used for carried credit card debt but people started to use it to "make it up next month" which violates Rule 1. Yes the documentation did sort of lean into this misuse, but people living on the edge could end up in a lot of trouble this way. I did a Costco run yesterday and it came out of Groceries/Supplies. And I just have to live with that for the rest of the month. If I need to later in the month I will reduce another category to increase Groceries.

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    • So the nYNAB philosophy basically boils down to treat your customers like children and force them to do things "for their own good"?  No choices allowed.  Crazy.

      Breaking backwards compatibility in software is always a risky thing and needs some strong justification OR some net benefit to offset the hassle.  nYNAB's justification for this change is weak and disrespectful ("because we know better than you") AND I now get to pay for all of this hassle monthly?  The ONLY benefit is that the mobile client actually syncs reliably.

      Why not just maintain the legacy behavior, even if it was off by default?  Those of us that have been successfully using YNAB3 and 4 could carry on as is, and those that can't control themselves could be shepherded into balancing their budget.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 yrs ago
      • Reported - view

      Cyan Wildebeest Because they chose putting a higher priority on people that need major help rather than those who are coasting with their budgets. Although I'm not sure they actually solved the problem they were solving since they introduced other even more confusing ways to screw up the budget.

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    • Cyan Wildebeest The red arrow to the right, while similar to the credit card thing,  is actually totally different issue.  The odd part to me is that taking away the red arrow but allowing credit card debt to be seamlessly acquired seems like opposite decisions.  Carrying negative balances overstates your budget, and you don't want to run out of money, I get that, and really the only reason to do it is for convenience.  The most common reason we did it was when our mortgage check would get cashed on the 31st instead of the 1st. We technically had 2 payments that month, and non the next.  But at that point we had already budgeted the money for that payment, so turning the arrow to the right was how we told the budget "hay you, the money our looking for has already been budgeted here."  I would love it if they re-implemented the ability to turn the arrow to the right, but made it so that you had to either have money already budgeted to get back above zero, or it would take the amount out of the "to be budgeted" until you did have enough to cover it.  The issue with that is just complexity being added for no major gain.

       

      HOWEVER, the credit card deal is much different.  What it is doing is allowing a neophyte budgeter to easily introduce new debt into their budget.  That is the INTENT of the change, to make acquiring debt easier for someone with an emergency that they cannot afford.  But by doing it this way, YNAB is essentially condoning credit card debt as the correct solution to emergencies.  I would MUCH rather that overspending (regardless of the payment method) be treated like overspending, and taken away from dollars you have to budget.  Then, if you don't have enough to cover your necessary expenses, there should be a clearly explained method for how to manually add debt into your budget.  But it should take EFFORT.  It should be clear that this is something you are doing because you NEED right now, to not because its the best way to handle your finances.

       

      Technically the way credit cards are handle is very accurate.  Its correct.  But I don't believe that its the most helpful way to handle them.  I think that it causes more issues than it resolves.

      Like 1
    • Agent99
    • Working to Get Smart at budgeting, finances and life
    • Agent99.1
    • 2 yrs ago
    • 1
    • Reported - view

    This whole thread is exactly why I haven’t moved to nYNAB. I use the Red Arrow as a tool in my budget to address timing issues with transactions and address reimbursements.  Additionally I didn’t like the CC handling; although I know now that I can simply set them up as Checking accounts and be done with that madness. 

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