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)
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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?
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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.
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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.
Here’s a video explaining how this works and here's an article about the credit card float Michele mentioned. :)
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Faness at YNAB
Ok, think i understand this now, and it reminded me of the bad space that I am in. While I pay all my bills and credit card payments in full each month, I live on the float
this is only the case in December and January typically. I work in an industry where 30 percent of my annual pay comes in a large bonus - which gets paid out in early February each year. Somin February we are flush with savings, and as the year ticks along each month a little comes out of that beyond my salary. By the time December hits we are usually at the brink of moving from being 1 or more months ahead to starting to live partially on the float. So right now, this is the lowest point, and so I get a big red message from YNAB saying that I need to lower my budget to get to zero. Thing is, can’t right now since it’s end of January and many categories are already maxed out.
but hey, that’s why I am here. We want to get closer to living off salary and not chipping into the savings so that we aren’t living off the float for ANY months
im also trying to decide how to handle being over budget. For example, I set aside $600 for January for my “spending”. This was clearly overly optimistic, and I went over. To get it back on budget, I had to lower other categories, the only ones with available cash were the quarterly items that aren’t due this month.
it feels like you should leave yourself in the red on line items so you can see where you are overspending, but YNAB seems to want to cover it up by using a different category, making yourself “all green” even though you may be over budget. Am I doing this right? Should I leave my spending money line item in the red? Or steal budget from other categories to make YNAB happy? For example I have a home repairs section that is $500 a month, for a total of $6000 per year. I didn’t do any home repair this month so I can either leave my spending in the red, or just take it from home repair, which “secretly” leaves me with only $5500 in home repair for the year, but as it’s all green you’d never know?
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Silver Dollars It's best to cover your over spending from another category. If you don't, it removes this amount from your to be budgeted for the next month. If you moved $500 from home repairs, just keep in mind that sooner or later, you'll probably want to build that back up.
For example, we just recently clawed our way out of perpetual overdraft. My plan is to budget $350/month for our hydro bill because we have large bills in the winter and lower ones in the summer. But I'm not far enough ahead yet and right now, I am just managing to budget for the large bills we have right now. By the time the summer comes and my bill is about $400 less than it is now, I can start building that buffer so that my budgeting is even, even though my spending won't be in that category.
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Silver Dollars Once you have red in any category, none of your other categories are accurate. If you overspent your Personal Spending category in January, you might as well take the money out of the Home Repair category as that is the only way to reflect the fact that you prioritized the Personal Spending over the Home Repair. This isn't necessarily a "bad" thing. None of us can predict the future - the monthly budget is just a plan and plans can and do change. What is important is that you recognize it and make the changes necessary so that your budget is accurate. If you got a bill tomorrow for $500 to repair something in the home, you wouldn't have the money to pay it in full, so you might as well adjust the budget to reflect that reality.
As I said, plans and priorities are allowed to change. What the YNAB category sets you up to do is to look at your Spending Category balance before you spend money and say hey, the balance is $100. The thing I want to buy is $150. What other category am I willing to lower my priority on in order to put that additional $50 into the Spending Money category? What's that, I'm totally comfortable taking it out of the 2018 vacation budget? Okay then, do it! It's your money, you get to set the priorities. But do it before you spend, not as clean up afterwards.
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Im exactly in the same situation. Honestly, credit card payments dont make any sense in ynab. No matter how much admins say it does.
I just delete the credit card payment when I get it. Problem solved.
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Steel Blue Router how can you reconcile your accounts??
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Hi Steel Blue Router !
Are you tracking your credit card purchases in your budget? Are things in your budget adding up? If not, we'd love to take a closer look at things! We can reach out via email to walk through things with you, if you're up for it. :)
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Steel Blue Router I have a similar issue - every time we pay off our credit card (in full) I get three automated transactions in YNAB, one in-flow called "Automatic Payment: Thank You", another two "Transfer from" or "Transfer to" charges between my checking account and credit card, one is an in-flow and the other an out-flow. They cancel each other out so we are oddly left with a net-positive balance if I approve of all three transactions. When I watch tutorials, they indicate that the credit card payment should simply be recorded as a single outflowing transaction from your bank account as 'Transfer to: Credit Card'. I don't follow why we get three transactions and why the end result is net positive.
I don't see this affecting anyone else on this thread, but I will say that annoyingly, the transfer from/to my credit card defaults to a closed credit card account so that adds to the confusion we face.
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Ivory Boat if you enter your payment as a scheduled transaction ahead of time then the imported transactions will match up with it.
It sounds like the transfer is a scheduled transaction that needs to be updated.
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Ivory Boat Those three transactions are coming from your bank, nothing YNAB can do about that. You can, however, enter your payment as a transfer in advance, so YNAB won't bother you for categories (on either side). Upon importing, one of the inflows will match the scheduler-entered transfer/payment, and you may safely delete the other two offsetting transactions.
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satcook I honestly dont know what reconcile does. But I dont care. I pay credit card in full.
But I have my own explanation why this is fine. When I pay credit card in full, I get a transaction with category as "Category Not Needed" and is marked as Outflow. Such transactions dont mean much because they dont have categories. So all my categories remain intact. Outflow just means amount was subtracted from one of my accounts. So even if I dont manually delete this transaction, Im still good.
But if you have another credit card NOT linked to ynab then you get a different transaction when a payment is made. Such transactions will have category as "Inflow: To Be budgeted" but are marked as Outflow. You might think since the category says "Inflow.." you received some money. But that is not the case. These are the transactions I always DELETE.
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Steel Blue Router Reconciling means comparing your balance in YNAB to the balance at the bank.
If you delete transactions, the two balances won't match. It is important that they do, otherwise, you are tracking money that doesn't correspond to the amount you have in the real world.
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Steel Blue Router Reconciling is an important part of making sure your balances are correct, and match your bank 100%. It's helpful even if you use Direct Import, or pay your card in full! Check out this short video on the reconciliation process.
Do you have both the checking account and credit card set up in YNAB? If you do, you'll want to change the Payee to show how the money is moving between your accounts, by using a Payment/Transfer option. This article goes into more detail on how to handle imported credit card payments. -
WordTenor and Nicole are right. I reverted the deletion. Since my credit card was NOT linked to ynab...I shouldnt be deleting those transactions. Makes sense.
Thanks all.
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