Credit Card payments "Activity" vs. Interest expense

Hi all! Longtime listener, first time poster. 🙂 I understand YNAB concepts pretty well (been using it for a few years and it's been great!) but there's one thing that I can't quite figure out, and that is where credit card payment "activity" and Credit card interest net out.

I have the regular old Category Group for "Credit Card Payments". My cards are listed there, each month the charges and payments get recorded there, and so on. I know that for the sake of eliminating credit card debt, ideally I want the total "Activity" (i.e., the sum of all activity) to be a negative number. Ideally, I want each of the cards to have a negative number for activity too. But all in all, I want that total number to be negative. Indicating that my debt is shrinking.

Then under Immediate Obligations, there's a category for Credit Card Interest. When the interest charge hits each month, it gets categorized there. And after all interest charges for the month are recorded, this shows a total amount that I've been charged interest for the month.

My question is this: I love having the negative "Credit Card Payments" total each month. I obsess over it. I aim for it. I budget for it. It makes me happy. But I'm not sure if it nets out positive with the interest. So... how do those two compare? Can I get ahead paying down debt if the negative amount is smaller than the interest? Here are some examples for clarity:

Let's say, in these examples, that all interest charges for the month are included and all credit card payments are made. So:

  1. If my "Credit Card Activity" total is -$50 (i.e., negative $50) and my Credit Card Interest is showing as $90... did I pay down my debt by $50, or did it grow by $40? 
  2. Similarly... if my Credit Card Activity total is zero, and my total interest for the month is showing as $100... did I merely "break even" for the month or am I $100 more in debt?

I've attended the workshops about using credit cards and I get it overall, but this is a wrinkle that I'm still not fully clear on.

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  • It depends on whether you are budgeting for the interest or not separately from budgeting for the debt paydown.

    If you are leaving the interest category overspent then it's not included in the Activity. If it's not included in the Activity, then you are falling behind if the Activity isn't more negative then the total interest.

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  • You may benefit from budgeting for the Interest in its own category. By doing so, ANYTHING you budget toward the CC Payment category is PROGRESS. (I'm assuming there is no additional credit overspending.)

    The bottom-line quantity to look for is the difference between the CC account balance and payment category balance/Available amount. A paid-in-full user will have the category Available cover the entire account balance amount. 

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  • Thanks for the answers! I am indeed budgeting for the interest as its own category. (YNAB actually won't let me drag/move it into the Credit Card Payments group.) I do budget for the interest (thus, that category is not overspent). And the interest being applied does show as a transaction on the Credit Card activity.  (What you see when you single-click the 'Activity' for that Credit Card.) So based on these responses, plus looking at it that way, I think the answer to my examples is the direction that favors me! (That is, for Example 1, I paid it down by $50. And for Example 2, I broke even.)

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

      Mig P In general, the Activity doesn't tell you much of anything useful. (Consider what happens if you make a budgeted purchase after your payment or if you look at the Activity before you payment.)

      What is important is the BUDGET entry. Since you don't have overspending, then any positive budget entry is progress.

      The other way to look at things is that the amount you cannot pay off (i.e., the "float" or post-payment debt) is the difference between the account balance and the CC Payment category Available. Paid-in-full status has the category cover the entire account balance. If there is a gap, the primary way to raise it is to budget to increase the category. A less effective way is to bring in outside funds (e.g., purchase rewards). Those are your only choices.

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