Line of credit vs credit card
I am so confused right now... Just when I thought I had it - I clearly didn't🤦♀️
Here in Denmark, we have a type of credit, that I am not sure exists in other countries and that might be what's tripping me up.
It's kind of a mix between a CC and a loan... I have an account that is specific to this credit. I can max it out to -80.000 DKK and pay the interest off that (the interest is variable depending on how much I have used and the duration) and I can pay it off as I get money in - just by transferring from one account to the other in my web-bank and I can"withdraw" from it whenever I need to. There is no set amount I have to pay each month, except for the interests every 3 months - and then I have to pay it all back within a set time frame, that can be negotiated with my bank if necessary.
My question is, do I make this a "line of credit" or a "credit card" or maybe even just a "checking account" in YNAB.
I started by making it a CC, but then it messes everything up when I transfer from my normal checking account to the credit and tells me that "Your credit card payment was greater than what you had available in your budget. You can fix this in your budget."
I hope you can help me - as this is getting really frustrating and I do love YNAB in every other way 😉
I believe YNAB treats a Line of Credit account exactly like a credit card. I added a test account and transaction and that appears to be the case.
You can make it a regular checking account (or start afresh with a new one and 'close' the old one in YNAB with a new name (e.g. Line of Credit (OLD)) and it will be filed away and hidden. Then it shouldn't behave like the credit card system YNAB uses.
You are warned about the payment because the money you transferred is still earmarked for other purposes by being in other categories. The budget is the plan for your cash on hand, and a given kroner cannot be spent on groceries after you use it to pay down debt.
The recommended way to do this is to make this a credit-based account (the "line of credit" and "credit card" accounts types are actually identical, pick either). When you withdraw from that account, that's recorded as a transfer from this credit account to your normal checking account, and the same amount will show up in the To Be Budgeted area of the budget. Budget this toward whatever category needed the additional funds.
As for repayment, you need to first reserve funds for that by making a budget entry in the account's category under the CC Payments group. Again, by reserving funds to reduce your debt, it will NOT be part of your other categories and therefore safe to transfer.