Credit Card Basics
The most important thing about using credit cards in your budget has nothing to do with credit cards. It's this:
In your YNAB budget, you'll make spending decisions based on your categories. Is there enough money in your clothing category for the shirt you want? Great. That has nothing to do with payment method, but it's your rock, your anchor.
So how are credit cards different?
When you spend money on a credit card, you create a little bit of debt. You owe the money. Did you buy that shirt or a $0.35 pack of gum? Debt.
The important thing is that you reserve the money to pay off that debt, and that is what your YNAB budget is designed to do. Here's how to get it done, using that gum (yes, silly) as an example:
- When you add a credit card to YNAB, a Credit Card Payment category is automatically created. It'll get used in step three below.
- Budget for your gum (using money you already have!) by assigning money to your Groceries category.
- When you use your credit card to buy gum, enter a spending transaction in your credit card account. When you do this, the money to cover the gum purchase will move from that spending category to your Credit Card Payments category. Automatically.
- Now, your money sits there in the Credit Card Payment category. Twiddling its thumbs. Waiting to make your payment.
Did You Hide Your Credit Card Payment Category?
It’s really important to keep the Credit Card Payment category visible in your budget, rather than hidden.
Hiding the category doesn’t stop it from behaving in the way described here, so keeping it visible will allow you to stay in control.
Plus, keeping an eye on the Credit Card Payment category can help you ensure you’re on track for your next payment - whether that’s paying off in full, a minimum payment, or somewhere in between.