Budgeting with Gift Cards (bought by me)

I am new to YNAB and I am in the process of trying to figure out if it will work for me. So far, I love it! One of the things I have run into when setting up my budget is I'm not sure I understand how to budget with gift cards that I have purchased. (I purchase a lot of gift cards to use at various places because I get a % back that goes towards my kid's school tuition.) Right now, I have a budget account "Gift Cards" that has the balance of all of the gift cards. When I was searching for how to deal with gift cards, I saw that lots of you do individual budget accounts for each gift card. Is that mainly for being able to track the balance of each gift card easily? Is there another way I should do this?

Also, I can't quite wrap my mind around what I need to do to make sure my accounts are all correct.  When I buy gift cards (with funds from my checking account), do I just need to mark that check (that I used to pay for the gift cards) as a transfer from my Checking Account budget account to my Gift Cards budget account?  And then how do I budget them?  Right now, I budgeted all the funds in the Gift Cards budget account into a category called "Gift Card Balance" (to prevent me from budgeting the gift cards towards things I can't use them for). And then when I buy something with a gift card, I add a transaction to the Gift Cards budget account and choose the correct category, and then subtract the purchase amount from the Gift Card Balance category. Is that right? And is that the best way to do it?

Thanks in advance for your help! I've found YNAB very intuitive thus far, and I just want to make sure I budget and enter these correctly.

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  • It sounds like you are entering the transactions correctly. Some people do a separate account for every category. I only have one. Some people consider the purchase of a Starbucks Gift card as an expenditure to their Dining Out category because it is a single use gift card and would consider a purchase of a Target gift card as a transfer from the Checking Account/Credit Card Account to the Gift Card Account because Target could hit a bunch of categories. I treat all gift cards as if they are multi-use because I think of it as just freeing up other funds.  

    Example: every month this survey site that I belong to gives me a $10 Amazon gift card. I treat it as a deposit to the Gift Card account. When I got my gift card code in November, I allocated those $10 to my new dining room chairs category. Am I going to get those chairs from Amazon? Nope. I've picked out chairs at Ikea. But to me it doesn't matter because the $10 I spend at Amazon on my gift card means $10 fewer dollars to pay to a credit card company for a purchase so those $10 can be for my new dining room chairs.

    Because I sometimes have multiple giftcards in a single account, I use the memo field of each transaction to note Amazon balance = $4.43 or Target balance = $56.93 or whatever.

    Reply Like 4
  • Hey  Simple Momma , I think you've brought up a great question! And thanks  jenmas for your helpful framework for thinking about gift cards. I especially like this...

    jenmas said:
    I treat all gift cards as if they are multi-use because I think of it as just freeing up other funds.  

    I think that's helpful, because it's true! A $10 Starbucks card is $10 less of your paycheck that you have to budget towards purchasing coffee, or whatever category coffee comes out of. It's $10 freed up for anything else you want - multi-use.

    So I think there are multiple ways to approach this and the best way is the way that works for you! 

    1. Individual Accounts for each gift card budgeted to individual/specific categories - The pro here is that you can have the minutia of knowing the balance on each card and how it's being spent. 

    2. Individual Accounts for each gift card budgeted to one gift card category - The pro here is that you can not only know the balance of each card, but you don't have to specify the exact type of expense, because you're generalizing it as gift cards.

    3. Single Account for all gift cards budgeted to individual/specific categories - The pro here is that you can dump all gift cards in one place, but have the flexibility to budget their use for specific expenses.

    4. Single Account for all gift cards budgeted to one gift card category - This is probably the easiest of setups and maintenance, as they are the least moving parts! :)

    Now as for the mechanics of it, you'll want to transfer money from your checking to the gift card account. It's an outflow from your checking account and inflow into your gift card account. And then from that gift card account, you can add transactions and categorize according to your set up!

    Let me know if that stirs up any further questions! 

    Reply Like 1
  • Dan at YNAB said:
    Now as for the mechanics of it, you'll want to transfer money from your checking to the gift card account. It's an outflow from your checking account and inflow into your gift card account.

     Which is great but you will need to be careful if your transfer to the gift card is from a credit card as YNAB will not currently recognise the transaction as an outgoing expenditure on the credit card so will not correctly adjust the budget for the credit card. You will need to do this manually otherwise the amount in the budget to pay the credit card falls behind and does not accurately reflect the amount you owe on the credit card. The best way is to ensure that the 'payment' for the credit card in the budget always equals the balance on the credit card account. Please let me know if I can help further 

    Reply Like 2
  • So I just ran into iwaddo's warning above:

    Transferred $100 from my Credit Card (outflow) to my Starbucks App (inflow), both of which are "on budget" accounts in nYNAB.  I put the $100 TBB that is generated into a Starbucks budget category, then I spend from the Starbucks App account against the Starbucks budget category when I buy each coffee.  I actually divide it into 2 budget categories, Now vs. Future, which allows me to "portion" how much of the gift card I want to use until my next paycheck vs. save for later.

    The Credit Card balance shows the incremental -$100 while the Starbucks App balance increases to +$100 as expected.  What does not happen, though, is $100 automatically flowing into the Credit Card Available/Payment column, so it throws off how much the budget allocates to pay off the card vs. what I really need to pay off the card (an extra $100).

    Is this a bug and if not, why does it work this way conceptually speaking?

    Reply Like
  • Hi, I’m not sure it is a bug but just a use case that was not envisaged.

    I have written a comprehensive note detailing the issue to help the support team understand this particular scenario, there are a number.  I am not sure whether we will see changes in the application.

    I have just got into the habit of manually adjusting the amount available on the CC in the budget to match the CC account register, not ideal but not to difficult.

    regards

    Reply Like
  • After further research and testing, here's how I'm handling it go forward which seems to work fairly well and may be helpful to others running into this same issue:

    1.  Must have (at least) $100 sitting in TBB already

    2.  Set up new empty budget category called "Starbucks Transfer Temp"

    3.  Enter $100 transaction in Credit Card account to buy Starbucks gift card and assign outflow to Starbucks Transfer Temp category.  Credit Card balance increases by $100 and Transfer Temp category goes negative $100.

    4.  Now enter $100 inflow transaction in Starbucks App (account) assigned to Starbucks Transfer Temp, clearing that budget category's Available back to 0.  Starbucks App account balance should now show the additional $100.  Available/Payment on Credit Card account should also now automatically reflect an additional $100 available to pay off the gift card purchased on credit.

    5.  Finally move the $100 remaining in TBB to whatever Starbucks budget category(s) you want to track actual purchases against.  I use Me vs. Wife vs. Future from a couple posts above since 2 of us use the app and want to limit how much we spend there each month.

    Testing this in an empty budget with only these transactions, Total Available shows $200 despite the budget only having $100 of real money in it, but this variance disappears as money is spent from the Starbucks App account (when gift card is fully spent, both Total Available and Total Budgeted = $100).

    Icing on the cake with this approach is that the gift card purchase itself does not show as "Spending" in reports (due to Starbucks Transfer Temp account zeroing out).  This makes better sense when I buy a $100 gift card but only use $30 of it at Starbucks during the month (spending in the Starbucks App account does flow through into reports as desired).

    Reply Like 1
      • kage2o
      • kage2o
      • 1 yr ago
      • Reported - view

      I ran into this issue today and Googled it and came to this thread.

      I used the method as described by Tandy , however, one problem came up.

      How do I account for paying the credit card in full at the end of the month?

      So:

      1) My TBB is zero as I've already assigned every dollar to work.

      2) I bought a GC with my CC.  I entered a $100 transaction in the CC account, with the category being "Clearing."  I'm now overspent in CC by $100, and am negative in "Clearing" category.

      3) I created a new GC account (Cash) with starting balance of zero.

      4) I entered a deposit in the new GC account with a $100 inflow.  This created a $100 balance in TBB.  I moved this $100 from TBB to the "Clearing" category.  The CC account now is no longer overspent since $100 was "budgeted" to it.

      All of this worked great.  However, where does the $100 actually come from when it's time to pay the CC?  

      So I realized that I was missing a step.  In my outlined scenario, I'm missing step 1.5, which should be:

      "1.5) Transfer $100 from checking to CC"

      This accounts for the entire cashflow.  If 1.5 wasn't completed, when I go pay off the CC at the end of the month, I may not have enough to pay from bank, especially if I have funds spread across multiple accounts, all of which make up my overall budget.

      Hope this helps others on how to account for buying GC with CC.

      Reply Like
      • Tandy
      • tandy1000rl
      • 1 yr ago
      • Reported - view

      kage2o Hi!  I followed your steps on a new blank budget and get to a slightly different outcome than how my method works.  The biggest obstacle I'm seeing is that I'm left with no funds to actually budget.  My accounts end up at -100 for Credit Card and +100 for Gift Card so they net to no value, but I do have 100 Payment available for Credit Card (green circle) in Budget area.  But what budget category do I now log my coffee purchases against?  I think the issue stems from you advising to start with zero TBB in step 1.

      My method says you need to start with say 100 TBB available so you actually have some value to transfer and ultimately budget into a non-Credit Card category (i.e. Starbucks Expense).  So starting with 100 TBB instead of 0 TBB and following your steps (but not step 1.5...yet) works more like I would want:  I have -100 in my CC, +100 in my GC, and +100 in my Checking.  On the Budget side I have 100 available in my CC Payment and 100 available in my Starbucks Expense category (ultimately where the 100 starting TBB is moved to) that I will spend my GC against.

      I guess ultimately it doesn't matter, but in the case of Starbucks specifically, since I can only use that GC at Starbucks, I like to have a budget category with an Available amount that ties to the Starbucks GC/App account balance.  It prevents that money from looking like it's available to budget for other expenses which of course it can't cover.

      Couple other thoughts:  your step 4 should be done in one step instead of the two you describe.  Instead of entering it first as a $100 Inflow To Be Budgeted, then moving it to the Clearing category, just put the 100 in the Inflow column directly against the Clearing category using the Gift Card account.  This keeps that 100 off of the Reports as income (which it is not).  As you know, any money coming through Inflow to Be Budgeted shows as Income on Reports.

      Finally I agree with step 1.5 in principle, but I just enter it whenever the Credit Card statement with that particular transaction eventually becomes due.  In our method the 100 is already showing Available in the green circle for the Credit Card (the whole reason for doing this convoluted method in the first place), so the money is there waiting to do its job of paying off that transaction on the Credit Card.  Labeling it step 1.5 implies you have to do this before you even purchase the GC, which isn't true.  Plus I would only input in YNAB the transfer from Checking to Credit Card when I actually perform that transaction with the bank.  Are you really prepaying your CC before you purchase a GC on it?

      I think we're generally aligned but just wanted to highlight a few of the things that confused me in your post.  Best of luck and glad you can now leverage YNAB to double and even triple dip on rewards points by "safely" using CCs to buy GCs.  Using this approach I get points for 1) cash back from credit card for buying the GC on credit 2) grocery store rewards (i.e. fuel rewards) for buying the GC from them 3) Starbucks points for using their app to buy coffee (loaded via the GC I bought on credit at a grocery store)

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  • I run into this problem too, and it's frustrating because it doesn't happen all the time.

    I recently bought a few hundred dollars in Costco gift cards, because wholesale clubs is the current category for the Discover It card and Costco doesn't take Discover in store. I bought some cards last month and set them up as a transfer from my Discover Card to my "Costco Cash Card" account and it worked fine, as if I was withdrawing cash and moving it to my cash account. I just want to move the money from one account to the other, and then budget purchases normally, but using "Costco Cash Card" as my form of payment.

    This time however, when I tried to do the same thing, it was showing that I had the amount I bought it Costco Cash Cards as income and wanted me to budget it. This makes no sense because again, I'm just moving from one account to another. I thought maybe it was something to do with categorizing this account as "Line of Credit", so I made a new one and categorized it as "Cash" and it does the same thing.

    The possibility is this happened before but I didn't notice, and just budgeted the money :(. I guess we'll see, and I hope this isn't the case. I don't think it is but now I'm worried.

    Anyway, I think this is buying gift cards to personally use thing is a common technique, and I wish YNAB would make their system more workable with this.

    Reply Like
    • So I'm  now noticing (and this is unusual for me to see because all my credit cards are paid in full every month) that my Discover Card shows "Overspending" in orange on the account page. I'm still messing with the best way to handle these gift cards.

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

      frozenveggies This is not an issue with gift cards, it's an issue with how nYNAB treats credit cards.  In particular, nYNAB assumes you intend to create new credit card debt in situations where many users do not intend to do so.  If you pay all your cards in full every month, you can sidestep the entire dance of having to force the card payment category to equal the card balance by telling nYNAB the card is really a checking account.  This does a few things:

      1.  The card payment category is eliminated.  That's okay, because you're just going to pay the statement balance anyway, and you know that number.

      2.  The negative balance of the checking account that really represents a credit card reduces the the total amount you have to budget, so all your other categories can stay at the same level they were when you were budgeting a card payment category equal to the card balance.

      The best advice I've seen for getting there is, a) rename your card account, e.g. "MasterCard Old".  b) create a new checking account, e.g. "MasterCard"  c) select all transactions in "MasterCard Old" and move them to "MasterCard"  d) wait for quite a while for the system to process this.

      I am appalled at the amount of effort people need to make to ensure that the card payment category for a PIF CC matches the account balance.  IMO, it's much better to use that time and mental effort for real budgeting issues instead of having to focus on manually ensuring that the redundant card payment category matches the card balance.

      This doesn't help people whose cards are not PIF; some of them are going to be accumulating more debt in YNAB than they intended to, absent watching the tricky details and deliberately correcting to eliminate debt they didn't intend to accumulate.

      Reply Like 2
      • Tandy
      • tandy1000rl
      • 1 yr ago
      • Reported - view

      frozenveggies Rather than doing a single "Transfer" transaction from the Credit Card to the Gift Card, break it up into two transactions using a "clearing" category as described in my 5 step post further above.  This method has been working quite well for me the past several weeks, but I agree the intuitive approach is to enter this transaction as a Transfer, so it would be nice for it to work that way natively.

      Reply Like
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 1 yr ago
      • Reported - view

      I too 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. YNAB doesn't like it, of course, and if I right-click on my account it shows me a warning because I have a chequing account in the negative, but I can ignore the warning as it doesn't create all sorts of self-cancelling steps in my budget for me to go through.

       

      I would not recommend it for a new YNABer who is carrying cc debt.  I am very debt-averse and pay my entire balance in full at the end of each month (two weeks before my due date) just so that I can start every month owing absolutely nothing. I didn't need YNAB going into conniptions over every cc-to-giftcard-account transfer as if I was in imminent peril of taking on permanent cc debt.

      Reply Like
    • I ended up using this CC/"checking" method for the one Discover card I talked about. Depending on how it goes I may end up doing this for other cards, but so far it seems to have helped with the one gift card problem.

      Reply Like
  • All - I haven't any gift cards setup yet but I'm trying to read through this post to see how to avoid any problems ... but I'm unclear.  If I add $100 to a Starbucks gift card using my credit card, isn't YNAB just going to treat that like any other $100 credit card transaction? 

    Wait ... thinking ... so you have an "account" setup for the gift cards ... and you want to see that $100 show as inflow to the gift card account.  I'm guessing the gift cards are not "connected" otherwise you'd see a $100 inflow to the cards.  But if the gift card is not connected then you'd have to record the inflow manually anyway with an inflow transaction, right?

    My wife and I were thinking about doing some budgeting using gift cards so I'm just trying to make sure I understand what others are seeing.

    Reply Like
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 1 yr ago
      • Reported - view

      Moki 

      I use my chequing account to buy the bulk of my gift cards, so for my situation it really is a cash transfer from chequing to the gift card account. I have one small coffee drive-thru card that I reload using my cc online, $40/month, for the convenience of not having to go into the shop to reload it. Since I've told YNAB my cc is a chequing account, I just enter a transfer from my cc to my coffee gc account.

      Assuming you want to create a Starbucks account, and that your credit cards are defined as credit cards:  when you use a credit card account to purchase the gift card, you enter a transfer from cc to gc. However, because you are transfering value and not assigning a category, YNAB treats this like a cash advance from your credit card and increases the TBB by the amount of the transfer.  At this point, you must manually budget the TBB amount to the cc payment for the credit card.

      Not everyone wants to track every coffee purchase. They could just as easily consider the purchase of the Starbucks card a one-time purchase (under their restaurant category) and not bother entering a transaction every time they used the Starbucks card. They can use the Starbucks card separate from the budget and only record another transaction when they need to reload the card again.

      Reply Like
  • HappyDance said:
    Since I've told YNAB my cc is a chequing account, I just enter a transfer from my cc to my coffee gc account.

     

    HappyDance said:
    However, because you are transfering value and not assigning a category, YNAB treats this like a cash advance from your credit card and increases the TBB by the amount of the transfer. At this point, you must manually budget the TBB amount to the cc payment for the credit card.

    I'll have to give time for that to settle or just give it a shot if/when I start putting gift cards in YNAB.  I'm having a hard time imagining how a "transfer" from a CC would look to YNAB.  As I'm learning YNAB, I'm finding that YNAB doesn't over-think things so I would expect that the transfer "from" CC would just look like any other outflow (-) and then as inflow (+) on whatever is on the "to" side of the transfer and all would work fine. But it sounds like it's a bit more nuanced than that.

     

    HappyDance said:
    Not everyone wants to track every coffee purchase. They could just as easily consider the purchase of the Starbucks card a one-time purchase

    That does sound more like what my wife and I would do ... BUT ... I also like the idea of recording gc transactions.  Not necessarily because I feel the need to track every gc purchase but so I can see the gc balance in YNAB.

    Reply Like 1
      • Tandy
      • tandy1000rl
      • 1 yr ago
      • 1
      • Reported - view

      Moki You'll find when you transfer money from Credit Card to Gift Card in 1 transaction, both balances are updated correctly in "Accounts", but the Credit Card budget category does not automatically increment by the transfer amount.  This is very noticeable if you pay your Credit Card in full each month and aren't on the "float", such that the Account balance normally equals the Budget category amount.  After doing this transaction, the two numbers will no longer automatically match.  So this entire thread is about ways of working around this observation.  All methods mentioned above work and it really comes down to which will work best for you given the level of detail you're wanting to track and the automatic functionality you're willing to give up.

      Reply Like 1
  • Tandy said:

     

    ...but the Credit Card budget category does not automatically increment by the transfer amount. This is very noticeable if you pay your Credit Card in full each month and aren't on the "float", such that the Account balance normally equals the Budget category amount. After doing this transaction, the two numbers will no longer automatically match.

     

     That seems odd.  I wonder if there is a logical reason for why YNAB behaves this way with CC transfers 🤔. 

    BTW - I just got a $200 gc for switching my mobile provider.  I added it as a disconnected account just to see what would happen.  As you know, the $200 basically looked like new income to YNAB and went straight to TBB.  I recorded a transaction and of course, I had to categorize it since the money is part of my budget now.  Once the gc is spent, I imagine I won't be able to delete the gc "account" since it has categorized transactions so I'll be stuck with it.  I guess I could just leave the gc "account" as a place-holder and use it with any future gc's.  Anyhow, I don't think I'm going to stick with this approach ... I don't need the complexity, particularly since I'm still new to YNAB.  I like that I can track the balance in YNAB but I can probably do that with an offline Tracking Account (off-budget account) since you can record transactions against those but don't have to categorize them and none of it impacts the budget. 

    I can't reload my particular gc but if I could reload it from my cc, I think I would try to find a way to enter the cc transaction as any other cc transaction (not a cc transfer/advance) and then just add the inflow to the gc account manually.  I'm not sure how I would categorize the cc transaction though ... I guess some benign category like "Cash" or "Gift Card".  Hmmm ... very interesting scenario to ponder ... thanks for the enlightenment. 

    Reply Like
  • I'm transitioning from YNAB4 to nYNAB after 5 years.  The whole YNAB system really helped me get my finances in order and actually retire a few years early.  I'm very grateful for that.

    I'm switching over now as it seems that the Mac OS and iOS updates are advancing past what the unsupported YNAB4 and YNAB classic will handle.  I'd have a hard time trying to recover if my mobile and laptop versions just crashed - and I don't think that day is too far off.

    I greatly appreciate what I would refer to as the "advanced user" comments regarding gift cards.  I will use the checking account method for my credit cards since I  pay my credit cards in full every month.

    I hate to do what amounts to a  "workaround" on what YNAB has intended; however, I need my accounts to balance and I like to purchase gift cards to obtain fuel savings points (I buy cards that I will use in the near future).

    Perhaps YNAB would consider have an "Advanced User" section where a you'd be able to transfer funds from credit cards to gift cards as previously discussed by putting in a radio button into the software.   

    Reply Like 1
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