Do you actually pay off credit card float?

Newbie here with a question. I've read all the official help documentation and searched the forum, but I haven't found a straightforward answer to this question ...

Do YNABers actually pay off the credit card float? Or do you leave the float in your checking account playing happily with your other money until the statement due date, content in the knowledge that you *could* pay the credit card to zero at any moment?

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  • If you have the money on hand to pay the credit card balance down to zero at any moment in time, you are not on the credit card float.

    Say I have only $500 available to pay my credit card today. And the balance is $500, but then I charge an additional $10 knowing that I will get paid in 2 days and the credit card payment of $510 won't be due for 4 days. In that situation I am on the credit card float - relying on tomorrow's paycheck to cover today's charges. It is entirely possible to live your entire life on the credit card float and never pay a single penny in interest. But if one thing goes wrong - say a government shut down that delays your paycheck by a month, all of a sudden, you don't have the cash available to pay your credit card balances and you start accruing interest.

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      • dakinemaui
      • dakinemaui
      • 2 mths ago
      • 1
      • Reported - view

      +1. Having "paid-in-full" status -- i.e., the Payment category matching the entire account balance -- is a bit of an extra emergency fund. Up to some amount (clearly!), one can revert to riding the CC float. However, if you're already at the limit of the amount you can float interest free, you're obviously going to start incurring interest if you're forced to handle things with additional debt.

      Reply Like 1
    • jenmas Right, but I’m curious whether you actually pay off the float or just keep the money on hand. I realize the difference between paying the float and just always having the money to pay off the float is mostly academic / philosophical. 

      dakinemaui Thanks for your reply. Automating the cc payment is an advantage that hadn’t occurred to me. 

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      • jenmas
      • jenmas
      • 2 mths ago
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      Lavender Filly and what I'm saying is that it's not float if you have cash on hand to pay to zero. When I first started YNAB I was on the credit card float. Once I read the YNAB articles on the float and understood what it was, I got off the float within 6 weeks. Since then I have not been on the float. Every purchase I make is budgeted for and backed by cash in one of my various accounts. Zero float. I do not pay the credit card company early. No one gets paid until they present a proper invoice. And I only pay the amount that they request because again, if it's not on the invoice, they don't get paid. So balance today may be $500, but if the credit card statement only says $475, that's all they are getting on the due date. However that $25 difference is not credit card float, it is merely the difference between statement balance and total account balance. The green available amount in your Credit Card Payment category may or may not represent float. Just because it doesn't go down to zero when you make a payment does not mean that you are on the credit card float.

      Reply Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
      • Reported - view

      This is an important distinction made by jenmas . The credit card float is the state of needing to rely on future income to pay for today's credit card purchases, because you don't have enough money to pay the old purchases and pay for current purchases. You actually need the grace period when you are on the float or else you cannot fund your entire budget.  So it is not as simple as taking advantage of the grace period.

      You don't pay off the float, because you don't have to change your credit card payment strategy at all to get off the float. You save money to get off the float, so that you no longer need the grace period. Or to put it another way:

      On the float: CC grace period = need

      Not on the float: CC grace period = want

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  • I pay the statement balance with the entire account balance reserved. I prefer to earn interest on the CC's money they have yet to request. Plus the statement balance is automated in my bill pay, so convenient and less chance of error.

    Reply Like 3
  • Lavender Filly said:
    I’m curious whether you actually pay off the float or just keep the money on hand.

     Of course it's your choice but I can't think of any benefit (to oneself, the banks would love it) to paying your card in full. Some people are so debt averse that they pay their card off multiple times per month. I, like dakinemaui , have my cards automated to pay the statement balance every month.

    Reply Like 3
  • I understand. Here is a more precise iteration of my question: Given the principal "do not purchase on credit something you do not have dollars for today," what is your real-world credit card management practice? Do you pay the balance on the statement in full on the due date? Or, have you effectively advanced payment such that on the due date you are paying off charges incurred after the due date until present? Or, are you engaged in some other practice I have not considered?

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
      • 1
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      Lavender Filly Simple answer. I pay the statement balance on or slightly before the due date (all but two of our cards are on autopay. No point in sending them money and second earlier than you have to. Money in my bank account earns interest. Money sent to the CC company does not.

      Reply Like 1
      • jenmas
      • jenmas
      • 2 mths ago
      • 2
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      Lavender Filly I have the autopayments turned on for 3 of my cards because they won't do ebill with my bank's billpay - statement balance on due date. The other cards I pay via the billpay from my bank a day or two before the due date. Again statement balance only. There is no benefit to paying more than the statement balance and as I noted above, the credit card company has not presented me with an invoice for those charges yet, and you don't get what you haven't asked for when it comes to bills and my money. So my credit card balances will likely never be zero because of the rolling nature of charges and payments, but it makes no difference to my budget.

      Reply Like 2
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