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.

How Credit Cards Work in YNAB

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:

  1. When you add a credit card account to YNAB, a corresponding Credit Card Payment Category is automatically created.
  2. Budget for your gum (using money you already have!) by assigning money to your Groceries category.
  3. When you use your credit card to buy gum, enter an outflow transaction in your credit card account register.
  4. YNAB automatically moves the money to cover the gum purchase from your Groceries spending category to the Credit Card Payment category. Automatically.
  5. Your money sits in your Credit Card Payment category, twiddling its thumbs until you make your payment.
Money spent on the credit card is removed from the Groceries category and added to the Credit Card Payment category.

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.

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