Can someone explain Credit Cards in YNAB Online to someone coming from YNAB 4

I am baffled by how YNAB online handles credit cards.  Does the app somehow automatically budget money into the credit card for the next month when you buy something with a credit card?

In YNAB 4 this seemed very simple in that credit card debt was somewhat abstracted.  Make sure you spend less money than you earn in a month and you're good.  I'm having a hard time wrapping my head around it in YNAB 5. 

Anyone have any good videos or tutorials on this?  I can't seem to figure it out

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  • First, you have to budget for the starting balance unless you plan to start in debt to the card. Then, yes, every time you purchase something on the card, that amount is transferred to the CC Payment category. The idea being that the CC Payment category tells you how much you have put aside to pay on your CC.

    There is a way to make CCs behave exactly as they did in YNAB 4. It's only advised for PIF CCs where you always have the funds ready to pay the balance off at any point in time. You just make your CC accounts checking accounts rather than CC accounts. It gets rid of the CC Payment category and it behaves exactly the same as it did in YNAB 4.

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  • Superbone Thank you!!! I will try to give the new CC method a shot but it is very confusing.  Especially when I'm budgeting for the month and I select "budget same values from last month".  Am I missing something there or is it a poor design choice?

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    • I think I get it now.  I screwed this up early on because I saw the extra money reported in the CC account on YNAB and added it back to my "to be budgeted".  I think I've got it back on track now

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 mths ago
      • Reported - view

      Forest Green Viper You would only use that option for CCs if you were on a debt repayment plan and could only pay so much each month instead of the statement balance. I personally set up a recurring transaction for the statement balance and use the Underfunded quick budget option.

      All my cards are PIF so I switched to the checking account method over a year ago after giving the CC Payment method a shot for a while. It was unnecessary for my purposes and would sometimes get out of sync and need to be babysat (adjusted).

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 mths ago
      • 1
      • Reported - view

      Forest Green Viper Cool, you've got it. If your card is PIF, that Payment balance should always match the credit card balance in the opposite direction.

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  • Forest Green Viper said:
    Does the app somehow automatically budget money into the credit card for the next month when you buy something with a credit card?

    Yes. In YNAB4, the amount reserved for payment was implicit. You were supposed to subtract the pre-YNAB Debt category balance from the account balance. A lot of people didn't and got into trouble. Additionally, people would wind up with a PYD category more negative than the account balance, and therefore had Monopoly money in their categories. So nYNAB made the payment explicit.

    Budgeted purchases increase the CC Payment category. Overspending does not, as there was no cash available for the purchase. If you cover overspending in the same month, that additional cash automatically flows to the CC Payment category. Otherwise, you have to budget toward the CC Payment category directly (equivalent to budgeting toward PYD in YNAB4). As with YNAB4, you need to budget for the starting balance on the card when bringing it into the budget.

    The biggest difference is credit-based (yellow) overspending is easily "lost". This is fairly easy to tell with a paid-in-full CC because the payment category will no longer match the account balance, but if you're not PIF, you need to be extra vigilant. Make it a habit to check last month's area soon after the transition for any late-posting transactions.

    The checking-account representation of a paid-in-full CC (@superbone's post) eliminates many of the above concerns as the entire account balance is implicitly reserved for payment at all times.

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