Confused by Credit Card Payments
Still new to YNAB, first month, and although I am a software developer and consider myself a savvy guy, the credit card system seems unintuitive to me.
I use credit cards for most of my spending, but pay everything off automatically with a transfer every month. In that sense I almost don't even want YNAB to know a credit card is involved. So far for expenses, that has worked well. YNAB doesn't care what "vehicle" I use to spend (debit card, credit card, check), I can categorize it how I want.
I also see it doing something when I categorize an item where it seems to be marking it as a credit card expense (I suppose for the future).
In the last few days, two of my automatic payments were made to my credit cards, for my PRIOR statement. So as an example, this month so far on a credit card I may have charged $2300, but today my credit card payment for last month hit, which was something like $4000. This seems to have confused YNAB, or me. I'm assuming it's me since this system takes time to understand and get used to.
I want YNAB to see this $4000 payment for last month and essentially ignore it, because it's not relevant to this month's budget. The money to pay for this was already accounted for. I'm not worried about CC payments, just my spending in a given month. This isn't new spending, just a payment on last month's spending. This also could be related to getting started. It doesn't help that YNAB is (understandably) month to month (first to last of month), meanwhile credit cards are from the 19th to the 19th, so mid month.
I watched the 84 second video, but it did not help or make sense to me. I checked some of the questions on the forum, but they seemed to be different questions. At this point, do I just delete or ignore the credit card payments? To me they are not related to my budgeting, it's the spending that matters (the moment I make a charge, not 30 days later when I pay it)
Hi, Silver Dollars .
YNAB doesn't reset from zero at the start of each month. It carries through with account balances and unspent category balances.
This is your first month? When you set up your accounts in YNAB, did you allocate enough money to pay the cc balance as it was on day 1? That is what is needed to be a paid-in-full cc user. You have to tell YNAB you intend to pay the entire balance. Going forward, it will syphon off the payment for cc by moving funds from the categories you are spending in. Spend $100 at the book store on cc, YNAB moves $100 from your entertainment category to your cc payment category. This presumes you have the funds to use cash or debit and are using your cc for the points or convenience.
Some paid-in-full cc users are actually living on the credit card float. They pay the balance off in full each month, but after it is paid, they have no funds left to live on and must use the cc again to pay for everything. YNAB reveals that to people who didn't know that that was their status.
Are you living on the float? Or can you attribute the entire starting balance of your cc to the payment category this month?
Sounds like you didn't reserve money in your budget to make the credit card balance. Unlike budgeted purchases after you start using YNAB, the spending you did on your card was never budgeted for, and YNAB doesn't know if you intend to carry a balance or pay it off. Therefore you need to explicitly reserve the cash in your budget to pay off that initial balance.
Hi Silver Dollars !
This was very well put by those above! I can say that once you get through the first month, the credit card process will iron itself out (as long as you budget for your starting balance in the first month). When you pay in full, your Available balance for the credit card category will match your credit card balance - meaning you have enough to pay it off at any time.