Credit card entry

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  • Updated 2 months ago
my credit card amount is actually 18,700. bt my balance is 3035.64 as of now.so the rest amt wich is 15,664.36 is my payment to bank ,i.e i owe dem and will be paying off in installments.. how do i enter this in good budget app.. im a newbie.. and well confused wether to use debt account or credit card account
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Muneera Sainulabdeen

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  • confused

Posted 2 months ago

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Alex Park, Official Rep

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Hi Muneera,

Welcome to Goodbudget! If you're paying down a balance on your credit card, it would be best to record that credit card in Goodbudget as a Debt Account. You can find further instructions for setting up a Debt Account in our Help Center here. In general, Debt Accounts are best for balances you're working to pay down, and Credit Card Accounts are for balances you pay off in full each month.

Hope that helps!
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Wayne Woodbury

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Hi, Muneera, and welcome to Goodbudget.  If you are still using the card for daily expenses, then I would just set it up as a credit card.  However, if you are in debt-reduction mode and are not using it until it is paid off, I would set it up as a debt account.  Goodbudget does not handle new charges on a debt account very well.

If you are still using the credit card, there are a couple of ways I can think of to maintain the card.
  • First, is to just track the current expenses as you have been doing and pay off the amount of your new expenses every month.  When you make that credit card payment, you would record it as a transfer from one account (such as checking) to your credit card account.  I would then create a debt reduction envelope where you can budget for debt reduction on the card.  Any debt reduction payments you make would be recorded as an expense on the account you make the payment from.  The reason you would record it as an expense instead of a transfer is because you are not tracking the debt in Goodbudget and recording it as a transfer would reduce the balance that you are tracking.  I would keep the debt reduction payment as a separate transaction so that you are making two payments per month on the credit card.  You would not need to record any interest and fees as an expense transaction as this is applied to the debt balance that you are not tracking.  Just make sure that your debt reduction payment is greater than the interest and fees or your will find yourself getting deeper into debt.  If you find you have a month where you overspend on that card (e.g., you have an emergency expense), you simply do not record that expense, which increases the debt you are not tracking, but does not increase the balance shown in Goodbudget.  There are alternatives to this, but they get messy.
  • Second (my preferred) is to set up a debt reduction envelope that shows a negative balance to reflect the amount you consider to be debt.  To do this, set this up as an empty envelope and record a "debt tracking" expense transaction where you use the credit card account as the account, and the debt reduction envelope as the envelope.  This will increase the debt on the credit card account to the actual balance and put the debt amount as a negative balance in your debt reduction envelope.  Again, you would make two payments on this card each month, but now they will both be transfer transactions.  Make one to pay for your monthly charges and one for reducing the debt.  With this method, you will record an expense for all interest and fees and apply it to the debt reduction envelope.  Emergency expenses can be recorded as you normally would, but you will add an additional envelope transfer transaction to fix your budget.  For example, let's say you had an unexpected car repair for which you did not budget.  Record the charge as you normally would and apply it to whichever envelope you would normally use for such an expense.  This may leave that envelope with a negative balance.  Next, create an envelope transfer transaction to move money from your debt reduction envelope to the envelope in question.  This gets your budget back on track by increasing the negative balance in your debt reduction envelope (increasing your debt).  The advantage to this method is that it allows you to use the tracking tools provided by Goodbuget to see where you are spending money so that you know how to make future adjustments to your budget (part of getting control of your finances is knowing where you spend every penny).
Some other advice I would give is to set aside a chunk of money for expenses.  Many experts in the US recommend $1000, but this is a crude measurement.  I would recommend enough money to cover one relatively major car repair or to repair or replace a large appliance.  This will help you avoid adding to your debt for those emergency expenses.  Once you are out of debt, start working towards having 3-6 months worth of expenses in savings to cover expenses if you find yourself without income.

A final recommendation would be to find a credit card offer with a "0% interest for X months" credit card with a low transfer fee and transfer your debt to that card.  Then set that card up as a debt account and continue using you other card for normal expenses.

Sorry this was so long.  I hope I didn't make it too confusing.

Wayne
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Tiffany Kucifer

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Wayne, this is an interesting way of managing an issue I'm dealing with too.  I typically pay off my CC balances in full, but when one card offered a "no interest until 2/2020" at the same time I was making some big travel plans, it was like pennies from heaven...until I had to manage it in GoodBudget! I have two monthly charges on that account that I use to basically keep it active, so I'm leaving those as is but now I also have a running balance of about $2K that I'll pay off before the promo expires (and earn interest on in the meantime!)  My convoluted solution: run that card as a Debt account instead of a Credit Card with a monthly envelope fill that will have the debt paid off in time. Enter my already-budgeted two transactions against that card (which keeps the card balance accurate and my budgeted envelope balance correct) but then transfer funds into the Debt envelope to remind me how much to pay in addition to cover the new charges. (This is where I'm overthinking it) Unfortunately that makes a double entry so it looks like I have less money than I really do, but since the charges are small it's just a minor annoyance. I can delete them when I reconcile the Debt account to make everything line up again. I thought I might try your solution of a debt envelope (instead of an account?), but it sounds like it might work against my current envelope strategy with budgeted funds for each month's allocation toward payoff, and I'm not sure what it would do to my Unallocated balance. Thoughts?
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Wayne Woodbury

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This might not be a good suggestion, but have you considered recording your two purchases as Fees under your debt payment transaction?  You wouldn't be tracking those two charges in your regular budget if you do this, so I would make those very small transactions that don't really matter for budgeting and tracking (like a vending machine purchase).  This would allow your debt account to reflect the correct balance without causing a major headache recording transactions.  If you make the same purchase repeatedly, you could also include it in an automatic transaction so you don't have to remember it and also account for it in your debt payment so that it is paid off in time.