First month setup with credit card

When first getting started, I'm not sure the best way to handle a credit card that I pay off every month. I assume this problem goes away after month 2.

The problem is that I have a credit card payment due this month, but it's for last month's spending where I didn't have a budget yet or transactions. So for this first month, do I still add a line item for what I know my credit card will be? The problem is that it looks like my budget for the current month is really high.

For example:

 - October credit card spending: $3,000, due November 10th

 - November budget: $5000 (of which around $3,000 will likely go on the same credit card to be paid December 10th)

If I leave off the CC payment it won't be budgeted for. If I put it in it looks like my November budget is $8,000.

Am I thinking about this correctly?

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  • I came to YNAB with a bunch of established debt, so I do have to budget each month for paying down those credit cards. You'll have to do that as well for your first month, as you pay the debt that you brought into YNAB. 

    However going forward you should budget to the categories that you spend on the credit card. So, if you're using the CC to buy $3000 gas/groceries/etc, then split up that $3k into each category. $1k for gas, $1k groceries, and so on. Then, when the transactions hit the credit card you can apply the category that you budgeted for. That's when the YNAB magic happens and the money you have budgeted in those categories will automatically be applied to the credit card payment category. When the bill is due, you should already have the correct amount in the CC payment category - as long as you manually enter or direct import from your CC institution.

    Clear as mud?!? 

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      • Wile E Coyote
      • Acme rocket pack tester and roadrunner expert
      • Purple_Cello_8e3835338c
      • 2 yrs ago
      • Reported - view

      thrak76 So I guess you budget those credit card purchases into the month in which the card payment is due?

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    • WordTenor
    • I have the honor to be your obedient servant
    • WordTenor
    • 2 yrs ago
    • 1
    • Reported - view

    If you pay your card in full (you'll see this abbreviated as "PIF" 'round these parts) then your CC category should always be equal to the amount you have charged. So if your card balance is -$1234.56, your CC payment category should be $1234.56. 

    Many new YNABers discover that they can't afford to budget for the entire card and still budget for everything else.  This is called being on the credit card float. If you can budget yourself off the float right away, great. If you can't, budget it down over time by adding money to your CC category every time you get paid. Eventually it will be equal to your card balance and you'll be off the float. 

    (There's a little  extra weirdness if you find yourself in the situation where the payment you have to make is bigger than your category balance, but for the sake of keeping things simple I'm leaving that out for now.)

    Like 1
  • Hi Aquamarine Hail ! Great question! Tan Major and Pink Trombone  are definitely pointing you in the right direction! :) 

    To summarize, if you're paying your statement balance rather than your current balance, then you're riding the credit card float (I wanted to be sure you had that resource for more clarification, if needed). 

    If you're a paid in full user - awesome! You'll budget the amount of your starting balance directly to the Credit Card Payment category, and all of your budgeted purchases will be added to that available amount as you move forward. Then, you'll have exactly what you need when the next payment comes due! 

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    • Janelle - YNAB Team thanks to you and everyone else I think I have a better handle on things now. That Credit Card Float blog post also was really helpful at well at giving more context. To go back to my initial example, it looks like the answer is that the correct thing is to expect to budget the full $8,000 for this month (if possible) because I need to budget both this month's expenses as well as last month's debt.

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      • ekshelley
      • ekshelley
      • 2 yrs ago
      • Reported - view

      Aquamarine Hail (9d345ad36625) That first month is always tricky due to budgeting for the prior debt. Next month will be easier, as you will only have to pay for the current charges, which will show up in the Available bubble when you enter your credit card purchases and their categories. I love how YNAB handles credit card balance tracking, once I got the credit card function for both cards with big, prior balances and for cards that are fully paid off each month. The interest fees for the debt-carrying cards took me a little longer, but now I know to budget that cost too. 

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    • Sky Blue Song (95ad9cb420aa) Yeah, I don't love that I had to do this, but I played around a bit and got the best result by doing this:

      • Set my start date for my credit card at the end of my last statement date (in mid-October)
      • Imported all the transactions since that last statement date. Even though those transactions were in October before I started YNAB, it allowed me to allocate budgets to all of them so that they could go into my "to pay my credit card" budget.

      This solved my 1st month problem. Now I'm starting November with a new budget. That budget is really big now because it includes October's expenses plus November's, but I get now that it's more correct this way. After all, those CC expenses from October were just paid with debt anyway, so I need to account for them.

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  • Same question here and after reading this info and the credit card float info, I'm still not sure I understand how to apply YNAB budgeting to my circumstances. I put everything I can on a credit card- everything. 
    Every gas station purchase, every grocery purchase, every restaurant purchase, Lowe's, etc.-  For 2 reasons- 1.  extra layer of protection (with the amount I put on the card in the course of the year, the card company is very likely to be very helpful in case of a dispute) and 2. I earn cash back. Why would I give up 1-5% of extra income and go through the hassle of carrying cash around?

    I do have the cash on hand to pay the card at any given moment, so I am spending last month's paycheck. However, I don't think I understand how to make YNAB reflect what I'm doing accurately. Since I put everything on the card, my first month's budget makes it look like I'm planning to spend twice as much as I really am.... Shouldn't the credit card transactions be showing up as "Activity" instead of "Budgeted"? 

    I just linked the accounts today, can I expect the individual transactions to show up in YNAB in the near future?

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

      Lhag Bowers In your first month only you have to budget for the balance on your credit card on the day you start (cleared plus pending) and you budget for it in the credit card category. So say you have a balance today of $450 on your Visa. As you set up your budget, you allocate $450 of your TBB to the credit card payment category that will be at the top (left hand column). It will now show an available amount of $450 in the right column. This means of all the cash on hand that you have, you have earmarked $450 to pay your Visa.

      Then you go ahead and allocate the rest of your TBB. Let's say you allocated $100 to groceries and tomorrow you go to the grocery store and spend $20. In your Visa account register you enter a transaction with the Payee being the name of the store and the category is groceries. What will happen is that the Available column (right) for groceries will go down to $80 and the Activity column will say -$20. YNAB will then automatically "move" that $20 up to the credit card payment category and the Activity column will say $20 (notice it is the same amount but the opposite sign as the activity column in the grocery category) and the Available amount will go up to $470. You now have $470 in your cash on hand that is set aside to pay your Visa bill.

      If you don't carry a balance on your card, you won't need to budget anything to the credit card payment category in your second month in YNAB as long as all the purchases you make on the card are budgeted purchases.

      Like 1
    • jenmas How does this work with the syncing of the bank accounts? in your example above, do I need to manually enter in the $20 grocery purchase or will it be downloaded from the Visa website and then I link it to a grocery transaction?

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

      Lhag Bowers it will download, but not for several days. That's why YNAB's official methodology is that you manually enter everything and use the downloading as a backup to catch omissions. What if you had $25 in your grocery category on Friday and stopped at the store on your way home and spent $18 but you didn't enter the transaction. The transaction won't clear your credit card until at least Monday and YNAB will not download pending transactions, only cleared ones. You go back to the store on Sunday and your category balance still says $25 so you spend $15. Oops now you are $7 in the hole. By using import as a back up, YNAB can match transactions between the download and your manual entries. 

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    • jenmas 

      1. Thanks for prompt response- great customer service!

      2. Same principle with payments make directly from my online checking account? Do you recommend I enter the transactions to the penny? i.e.- Do I enter the grocery transaction as $18 or $17.89?

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    • Lhag Bowers I guess my "concern" with the manual entry method is implementing with my wife.  I'm trying to make this as low impact to her as possible.... Anyone with any suggestions for how to handle the the daily transactions of 2 account users?

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

      Lhag Bowers I do everything to the penny because I need to know how much money exists in my accounts and if I start rounding, I won't know. I do as much spending on my cards as possible and rarely use cash. But I still track cash to the penny and have never been more than $0.03 off in which case I take it out of my Restaurant category because it's the one I should probably be spending less in.

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

      Lhag Bowers Does your wife use a lot of cash? If not, every evening just check the credit cards online and see what new transactions are there and add them in. I certainly don't enter everything at point of sale. I'll do some on the train on my way home or sitting in front of the TV at night. I just stick all receipts in my wallet since I already have it out to make the payment.

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    • jenmas So i went ahead and manually entered in our credit card transactions for the month of December and (I'm guessing coincidentally) the second I finished, all the transactions imported..... 

      Now I have a couple questions-

      1. One of the things that imported was my payment of last month's credit card dollars- how best to deal with this? Just delete it? Since my budget is from December 1 on?

      2. When manually entering one credit card transaction for Sam's Club, I gave 25 dollars to groceries and 25.88 to fun money. However, now that the import has happened, I have 50.88 that I need to categorize. How best to handle? Delete?

       

      Thanks again!

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

      Lhag Bowers Full disclosure - I don't import because I have no interest in sharing my login details with an outside party. But yeah, if there is a transaction that doesn't belong there, delete it.

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  • Next credit card issue- how to categorize the payment leaving my bank and going to pay the credit card? It appears as two transactions but is really just moving money from checking to cover the credit card.

    Also, how to categorize using cashback bonus to pay on credit card? see screen shot below.

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  • Re the payment to the card change the downloaded bank entries payee to a transfer from current to CC account. You’ll probably also need to delete the credit entry on the CC side if it occurred on a different date - otherwise you’ll end up with a duplicate credit on the CC

    Re the cash backs on the card there are two options - assign directly to budget categories (which can make the budget reporting more accurate if the credits actually relate to these budget areas), or to TBB and then budget as normal. Just remember to check that your CC payment is still the opposite of your CC account balance (assuming paid in full) - you may need to make some manual CC budget adjustments to bring it back in line.

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    • nmw 

      I just tried to record my cashback bonus as a TBB.  It decreased the balance on my cc account, but did not appear in the TBB balance, nor did it change anything in my  budget.  Any idea why that might be?

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • Reported - view

      Spring Green Lightning 

      A recent step-by-step on recording the cashback bonus as TBB was discussed in this thread.

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