Managing Credit Cards in YNAB

Support specialist Kat joins the podcast to talk about managing credit cards in YNAB. Tracking and managing credit cards can be confusing in YNAB if you are new to the app, but Kat breaks down how credit cards work in zero-based budgeting and the nuances of how the YNAB app handles them. Ben and Kat also field some common questions from YNAB users about credit cards and credit strategies.
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Timestamps:
0:00 Intro
1:55 How credit cards work in YNAB (including the credit card float)
10:06 Handling returns and other inflows to the credit card account
19:22 Handling credit card interest
26:02 Buy now, pay later services (and how to handle them in YNAB)
37:52 Credit card hacking (using points, rewards, and cash back)
43:15 Sharing credit cards with kids
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[@stephaniebfi4297]

My daughter got her first job so I started her on YNAB. She learned so much dividing up her first paycheck. I pray i’m raising a budget nerd.

[@cjmiller5972]

Yes! YNAB was my "congrats on your job!" Gift to my daughter as well. I talked with her about my budget as well, so she was eager to manage her money.

[@DonLafontaine62]

I use credit cards ALMOST exclusively. There is one exception and thats for my electrical bill (They don't allow automatic payments from a credit card). I pay it all off a few times a month, the bonus is a get cashback, and that gives me 100$ every month! The cashback amount makes it's way into the buffer. My reconciliation frequency matches when I pay off the cards.

[@anaatkinson]

Please do a troubleshooting video with a support specialist! Like top 10 mistakes made on the app. That would be SO helpful!

[@RandomFandomDragon]

I second this! I've only used support once, and it was a positive experience. I'd be interested in the most common issues they see.

[@StudioHannah]

Thirded!

[@sofondadavis5028]

Yes

[@RandomFandomDragon]

I work for a credit card processor, and interest can be a tricky beast. As long as you are not adding to the balance, using the previous month's interest amount is the best quick-and-dirty way to estimate it. If you want to get it to the penny, then you have to dig into the fine print. A lot of credit cards (probably the more predatory ones) use daily balance when calculating interest, so it's not as simple as just the APR. I absolutely love YNAB. Still paying off debts, but I am out of the paycheck to paycheck cycle! I've got a starter emergency fund, got all my true expense categories sorted and am funding (I call the group Winter is Coming, lol) and even got a pet emergency fund started. The peace of mind YNAB has brought is just amazing. I am thankful every day I saw a random comment telling people to try it, and have left similar comments on other videos.

[@Ann-Marielivingonabudget]

I LOVE how credit cards work in YNAB. It has made it so easy for me to keep my credit card spending straight in my budget. I only use cc's for items already in my budget, and this helps me to not overspend without thinking about it. And I'm earning rewards for my monthly bills! It's allowed our family to travel for less, which is a priority for us. Love how YNAB helps us all to budget with our priorities in mind!

[@CharlesReinmuth]

I love Kat. So well spoken, very knowledgeable, but also compassionate and thoughtful about people's varying situations. It's clear she not only has the brains, but also the heart for what she does!

[@grandspartan1176]

I do ALL of my spending on credit cards just to gather rewards. All rewards inflows are ready to assign for tracking and this year I have raked in more than $800 in cash back! YNAB makes it easy to always pay it in full wihout any fuss and I just sit back and enjoy the free money.

[@lindsaysimplified]

Maybe Ben can give us the back story on why he’s chosen to not use credit cards. We don’t carry a balance but we’ve debated getting rid of them, just because we have found it is easier for us to spend more (even if we do WAM it).

[@softhands42]

I was really glad that it was addressed that the money from a credit to the credit card statement isn’t automatically moved out of the credit card payment category if you categorize it as an inflow to “Ready to Assign.” I would always be confused why the money didn’t automatically move, and it made me really nervous about manually moving the money over. Now that I know that that is intentional and not a bug, I’ll feel more comfortable moving the money in that situation. :)

[@LeahBandB]

This so funny to me. Before YNAB, I budgeted by account and I bought everything with my credit cards. I had a spending checking account and I had a checking account that I called a "credit card holding" account that I only used to pay off my credit cards. Whenever I bought something on my credit card, I would immediately transfer the money from my spending checking account to my cc holding account so that in my brain, I understood "That money is SPENT. It's gone." It also kept me from buying things on credit that I couldn't afford. My mantra was that I should be able to pay off my credit card at any time in full. All of this is to say that when I first started YNAB, I was like, "Yes! They get it!" It literally mirrors exactly how I was already budgeting! Confession: I still budget by account - don't judge me! - but I love how YNAB fits with my whole system.

[@angelakinney3292]

That was just great guys, really enjoyed it.

[@sherryfrey1693]

Thank you so much, Ben and Kat! I am brand new to Ynab and was confused about the negative balance for the interest. I feel better now!

[@loricash5849]

When I buy from my favorite home shopping channel, I use the 4 easy pay option to try things on and return if need be, if it fits well and I still like the color I can go ahead and pay it off early. Win\win.

[@tiffanyanderson9437]

Great conversation! Thank you both for sharing how you use credit cards. I’ve been without credit cards for a while, and am thinking about jumping in again, but this time, to use credit as a stepping stone into business. I truly wish my parents let me open a credit card with paid-in-full stipulations when I got to college - that would have saved me decades of heartache!

[@WeightwatcherswithCarrie]

We end up making about $1,500 free money every year when using the credit cards in YNAB. We just set up autopay on all our credit cards and use Sam's cc for gas (get 5% back), Visa for reg Bill's (1.5% back), etc... we receive a lot of rewards back from that when using ccs for every single bill and paying off full amount every month. We know every penny is on hold in our credit card category. Love it and we manage it perfectly.

[@himexkoneko]

I earn cashback using my Chase Amazon card for pretty much everything and I have Rakuten as well, so I get to stack cashback. Sometimes I've been able to strategically plan my purchases when Rakuten has high cashback at the store I need to buy from. Right now I assign all my cashback into a "Black Friday" category, but we'll see if I actually use it for that. Either way, it's fun to watch it grow month after month!

[@playtesterprime2855]

I learned so much. Kat is impressive, I’d love to see her on again!

[@christinesmith4217]

Would love to see an episode about tips with kids and money. Loved to hear about her kids being authorized users once they turn 16 and that she pays for their travel when they come to see her!

[@ApplianceJunk]

Oh how simple Bens one spend account and no credit card usage must be. Your my budgeting hero Ben and I’d like to follow your example. I use my debit card often with my iPhone and the wallet app because it feels safer using tap & pay but I’d like to start using it more often. Ben, do you simple use your debit card everywhere? For example online, gas pumps and hotels? Maybe you use cash a lot or purchase gift cards for online purchases? Thanks for any input and keep up the good work! Love the channel, thanks!

[@anniemilakovic7683]

Please please add functionality for paid in full folks where it turns the CC category yellow if it doesn’t match the card balance, AND add a quick budget button to fix that. Basically, please add the credit card assist toolkit functionality natively so it works on mobile too!❤❤❤

[@jeannehenegar9927]

Great mom tips for high school and college age children.

[@SwanShadow]

The fact that the YNAB development folks realize that the way the program handles credit cards is confusing, and they haven't fixed it to make it not (or at least less) confusing, confirms what I've suspected as a new YNAB user: they really don't understand how their customers use credit cards. Some of us (hand raised) use a credit card as though it were a debit card -- we don't accrue any debt on the card because we pay it off entirely every month. I use a credit card rather than a debit card for everyday spending because doing so provides other benefits (specifically, airline miles). But when I pay off the card balance in its entirety, my YNAB budget blows up, and it takes days of frustration and maneuvering numbers around on my part every month to fix my budget. It's the one thing that tempts me every month to ditch a program I otherwise love. And it sounds as though YNAB's answer to my frustration is essentially, "We know it doesn't work intuitively, but you just have to get used to how it works." That seems like poor customer focus for a company that shines in pretty much every other aspect, because YNAB is trying to compel the user to work the product the way they want it to work, rather than the way actual credit card use works.

[@emilycrowe4625]

That sounds really frustrating. I also use credit cards in the way you describe and I have zero issues. Have you specifically reached out to customer support for help? Are you covering all overspending within your budget before making a payment? I would argue that the way credit cards are handled in YNAB is specifically for the folks that use credit cards like debit cards. I like to make sure that the amount in my payment category matches the credit card balance and then I know I'm good. This happens automatically as long as any overspending is covered. There has to be a hiccup in your budget for this to not be functioning correctly.

[@RandomFandomDragon]

@@emilycrowe4625 Agreed on all counts. I am still in my debt pay off stage, so it took me a bit to figure out how to account for cash back and interest in a way that made sense for me. I do have one card I use for specific bills and pay off each month, and it works much easier than those that carry a balance.

[@mathsiecat]

Double check your budget. What you are describing sounds totally like „riding the float“ which is well described in this video.

[@mogman1]

I feel like "If You Give A YNABer a Gift Card" could become a good parody of "If You Give A Mouse A Cookie"

[@Rollingstone2009]

It would be great to have an end date feature for scheduled payments.

[@asifmhusainable]

I recommend offering a subscription plan catered to families in a single household. That would be great! For example, if there was one parent and two teenagers working in the household, it would be awesome to not have to pay for three separate subscriptions.

[@shelby7599]

You can create multiple budgets on one subscription. You’d use the same login but they can keep their personal budget open

[@YNABofficial]

You have read our minds!! We are working on the solution to this as I type! Keep your eyes peeled for future announcements 👀 🌻 Hannah

[@asifmhusainable]

@@shelby7599 Not the same.

[@asifmhusainable]

@@YNABofficial Awesome! Thank you!

[@lmbarnes3]

With credit cards. Why does ynab not keep the same category. On returns, I always have to find out what budget category I used. Especially for multiple returns.

[@YNABofficial]

It sounds like YNAB is automatically assigning the most recently used category for that payee, which is the expected behavior. I can see how that'd be frustrating if you're using that payee for multiple categories and have returns. ~Ernie

[@larryjunker4572]

Is YNAB considering pulling in current balances for credit cards and other connected accounts?

[@vincentapa1376]

@Ben -- please investigate a zero balance vs running a small balance (no interest) every month to enhance your credit score. My experience is a small balance reported and paid each month results in a better credit score. Is this worth a deep dive?

[@seethruhead7119]

For people who don't pay down their cards every month. Cash back can go straight into your "interest and fees" category.

[@innerthreatcircus5651]

What is the difference between these buy now pay later you're talking about? In Brazil and Argentina (i guess many other companies) we buy lots of stuff in installments directly from the credit cards. From 3 to 30 installments is common here. How do we input these future scheduled debts in its category (if it's leisure, under it, if it's a tire installments, under car category)?

[@YNABofficial]

It depends-sometimes the buy now pay later programs are similar to the installment plans you're familiar with, and sometimes they're not 🤣. Start by checking out the resource below and then reach out to Support if you need more help! In the end, we'll make sure you know exactly how to input these purchases in YNAB! ~Ernie support.youneedabudget.com/en_us/managing-buy-now-pay-later-purchases-in-ynab-an-overview-BJrmfNdVj

[@cjmiller5972]

Can you track the buy now pay later in the loan parts of the app? Make it like a car payment?

[@YNABofficial]

You can track BNPL, but you don't want to set it up as a loan account. Instead, add a scheduled transaction for each BNPL purchase (you can set it to repeat) and then also add a category for your BNPL purchases that you fund each month. ~Ernie

[@adifferentkennybaker]

I wonder is a polite way to ask the creators to get to the point faster?

[@lakeisharhyant2045]

What do I d9 if a refund pre-YNAB

[@YNABofficial]

Hi Lakeisha! If the refund is for a pre-YNAB purchase, categorize it as Ready to Assign support.ynab.com/en_us/how-to-handle-credit-card-refunds-H1J7qDWkj#no ~Ernie

[@tetrealll132]

if you pay off your credit card every month why would you have interest?

[@mathsiecat]

Where in the world are you located? In GER, where I am, CCs are paid automatically in full at the end of the month by an automatic transfer from checking. Interest only hits when you have NSF to pay the card. AFAIK, in the US, the exact rules vary wildly from cc to cc, but generally from DateOfPurchase you get a certain amount of time interest-free. In that time, you get a statement with a DeadlineToPay. If you send the cc the full StatementBalance within the date requested, often you don’t get hit with interest. However, there is usually a difference between StatementBalance and ActualCardBalance, which is what YNAB is talking about when they go on about „cc float“. And that difference, the Float, when nonzero, gathers interest, generally on a daily basis. Sadly, not everyone using a cc in the US can afford to pay the balance in full. Not even everyone can afford to pay the statement balance. This is how things get bad fast.

[@conureron3792]

Thanks to YNAB I’ve managed to pay off my credit cards each month. But, this month I’ve been hit with a major car repair - that wasn’t fully funded, so I might have to float it and pay it off next month…

[@YNABofficial]

It happens! Adding a target to the credit card payment category can be a nice way to make a plan for paying it off! ~Ernie

[@conureron3792]

@@YNABofficial - thanks for the tip!

[@alexisbeaver107]

Which Facebook group are you referring to. I’d like to join it but there are a lot of them.

[@YNABofficial]

This one! YNAB (You Need a Budget) Fans! facebook.com/groups/YNABFans ~Ernie

[@victoriathomas967]

@@YNABofficial Hey you’re supposed to be on vacation!

[@YNABofficial]

@@victoriathomas967 🤣Thankfully, this episode was recorded when I actually was on vacation! ~Ernie

[@Questionablexfun]

Interesting- it makes interest sound like a slightly varying monthly subscription for the card itself lol

[@Johnnydhee]

The way you guys calculate net worth has been completely incorrect for years. Never takes my accumulated equity or down payment into the equation.

[@YNABofficial]

You could add your accumulated equity as a tracking account and manually update it every month or so. In the net worth report, you can then pick and choose which accounts factor into the Net Worth calculation. ~Ernie

[@daniellejones8460]

I need visuals 😢

[@YNABofficial]

We have visuals in our Credit Card workshop, which you can watch live or on-demand! www.ynab.com/free-workshops/ ~Ernie

[@daniellejones8460]

@@YNABofficial YEP! I signed up for the LIVE class yesterday!

[@justafan323]

Woud have been nice to have more user questions answered and less "infomerical" chit chat.

[@Tesla-Cannon]

I love the idea of incentivizing your children to visit you. I'd probably pay for my parents more if they paid for the travel.