Carrying Credit Card Debt | Interest Handling (Again)

After watching an official YNAB YouTube video today where #3 was performed, it made me revisit how I'm handling this.  Just curious in 2021 how you all are dealing with CC interest when you can't yet pay off the balance.

I've seen 3 different ways people seem to deal with credit card interest when they are not yet able to pay the card in full:

  1. Enter the interest transactions in the card account and then let the budget interest category just be negative until it converts to added debt the next month.  Then enter the minimum payment in the credit card payment category.
  2. Enter the interest transactions in the card account and then enter the minimum card amount in the budget under the "interest" section.  This simply prevents the category from remaining in the negative in the budget..
  3. This is the interesting one that I saw Hannah do in a YouTube YNAB video.  She never entered the interest transaction in the card account.  Instead, she simply "reconciled" the account and, when prompted, entered the new proper account balance (including the current month's interest) in the reconciliation.
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  • When I was paying down multiple cards, I'd enter all of the interest transactions (I'm a stickler for accurate account registers), but I'd leave the interest category overspent (collapsed in its own group).

    For me, budgeting for the interest was an extra step when I had already determined I was going to be paying minimums on my cards, with the exception of my focus debt.

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      • Chappy
      • Architectural Designer
      • Chappyeight
      • 4 mths ago
      • Reported - view

      Yes, this is how I've been currently operating.  I was just annoyed that it told me those categories were in the negative (even though I know that's accurate) since I already knew I couldn't pay that.  YNAB is correct, my OCD just kicked up. :)

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    • Chappy Sounds like you'll love Move Light Sound Life 's workaround to keep your budget a bit more tidy! 😊

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    • Marisa Funny, I've been doing that since the beginning, and I'm pretty sure I got that from someone else, which means it came from official YNAB channels.  I never thought of it as a workaround.  Just how credit cards work.

      Now, I know that using a similar technique to represent financing debt on credit was something I didn't see until I found the forum.  That took some mental cartwheels to accept at first.  I don't think I'd call that a workaround, either, as it's also just how credit cards work, albeit a little more... abstract.

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  • That said, I do reconcile my tracking loan accounts to capture the interest, since it doesn't usually come across as an actual transaction.

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  • What we did when paying interest was to

    1. Budget whatever we were going to pay to the card anyways (above otherwise budgeted purchases) in the CC payment category.
    2. Enter the interest as an actual transaction, categorized to the interest/fees category.
    3. Move money from the CC Payment category to cover the "overspending" in the interest category. 

    You'll notice that the available to pay the CC doesn't change, but everything is green again, reflecting your plan.

    Mathematical sleight of hand.  Very fun and satisfying.

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    • I also appreciate having the data.  Just this past week, searched interest in all accounts, and could see that I was paying multiple hundreds of dollars in interest a month.  It's terribly motivating to not get back in debt.  It helped me make some good choices when I didn't want to this week.

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