issues with debt accounts vs credit card accounts

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  • Updated 4 weeks ago
I am a newbie and have searched the user guide and forum for guidance (and found some) but not enough to solve these specific issues.  I have CC accounts that I do not pay off every month (yet) so I set those up as Debt Accounts.  I like that I am able to see my debt progress and that the CC balances do not reduce my un-allocated funds.  I am still using two or three of those CC to purchase items that belong in my budget envelopes because those cards have cash rewards.  

If I purchase groceries with my Discover card (which has a balance that I am working to pay off and have identified it as such) then I cannot add that transaction to my grocery envelope.  I can only add it to the debt account as a new charge. I do not pay the full balance each month but I pay my current transactions plus part of the old debt.  The current transactions do not become part of my budget for the month.

If I purchase groceries with my Discover card (which has a balance that I am working to pay off but have identified it as "pay in full every month") then I can add that transaction to my grocery envelope.  Additionally, I have to setup a budget envelope for the monthly interest charge in order to reconcile the Discover statement.  Unfortunately, I cannot see this account in the debt progress charts and the balance reduces my un-allocated funds.

What I would like to be able to do is this:

Purchase groceries with my Discover card (that has a debt balance).  Add that transaction to my grocery envelope.  Add the monthly interest to the debt account which increases the debt balance only.  Transfer a payment from my checking account to the Discover account which pays for the grocery transaction plus some of the old debt.   The account balance has no affect on my un-allocated funds.

It appears I want to keep my cake and eat it too.

What am I missing?
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Dale Adams

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  • confused

Posted 3 months ago

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Wayne Woodbury

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Hi, Dale.  Welcome to the group.  I pay my credit cards off each month, so I had not thought about this problem previously.  I tried experimenting with creating transactions against a car loan I have set up and I can see what you are talking about.  It will not allow you to record a budget transaction.  I believe this is because debt accounts are "off budget."  In thinking about this, I wonder if this isn't a good thing.  The idea with a debt account is that you are trying to eliminate it.  In thinking about this from a technical standpoint, it seems like it would be difficult to maintain the "debt" portion separate from the "daily expense/on budget" portion if you allowed crossover.

I wonder if the best solution here is to set up a separate credit card account for the on-budget spending.  This one you would pay off every month, while the debt account you would make monthly payments on until it was gone.  You could record interest and fees against either account, depending on how you wanted to manage that portion of your debt, but it seems to make the most sense to manage that in the debt account.  Once the debt account is paid off, it would go away, whereas the on-budget credit card account would persist and you would continue to use it after the debt was gone.

Debt accounts are new and I am still learning about them, so I don't know if my suggestion is the best way.  I also did not find a lot of information on the User Guide web page.  This (how to manage debt) would be a great topic to add.  I'm interested to hear what the Goodbudget people have to say on this.

Wayne
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Dale Adams

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I agree with you and came to the same conclusion after thinking about my dilemma.  And like you, I await further comments.  Thanks!
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Alex Park, Official Rep

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Hi Dale,

Thanks for your question. It sounds like you're trying to figure out how to best record expenses for a credit card that you've entered as a Debt Account but you are still actively using as you try to pay down its balance. Additionally, it sounds like you would like to have those expenses draw from your normal Envelopes, but would still like the debt balance to be off-budget.

The suggestion Wayne has provided is a possible one. As he explains, you can do your month-to-month spending on the Credit Card Account and track payoff and interest through the Debt Account. However this plan has some possible complications. If there is a month where you don't pay off the full balance in your Credit Card Account, it will become difficult to balance out the "two" accounts. Furthermore, Reconciling your Accounts will no longer be possible, as your statement balance will not match up with any number in Goodbudget.

Another possible way of tracking your card would be through a two step process to increase the card's balance while also drawing money from your normal Envelopes like in a normal transaction. In this process you would have your card entered as only one Account, a Debt account. First, you would record a New Charge to your Debt Account for the amount of the purchase. Then next, you would make an Envelope Transfer of money from the envelope you wish to use to your Debt Payment Envelope. For example, if you made a purchase at the grocery store of $20, you would first add a New Charge of $20, then transfer $20 from your Groceries envelope to your Debt Payment envelope. This would simulate spending through your normal Envelopes and keep your balance off-budget. However, this methods has two steps for each expense and your expenses recorded in this way will not show in your Reports.

Debt Accounts were originally designed to be used for debts with an off-budget balance you are working to pay off rather than ones with balances you are still actively using, so while there are ways that you can simulate recording transactions to debt accounts in Goodbudget, because it involves uses the Debt Accounts in a way they were not designed to be used for, it currently requires a little extra work.

I hope that makes sense, and please let us know if you have any further questions.
(Edited)
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Andrew Weiss

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Or just remove the warning/limitation in the expense tab and let us record there anyways.  After all we budget our debt payments every month so it should be "on-budget" without limitation.  Keep debt tab as-is but allow expense/credit tab to feed into that bucket too.
(Edited)
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Andrew Weiss

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The only way I've found to do this is to add it as a complete payoff CC (lie)... then create a budgeted extra payment envelope with an amount.  Then Fill with negative unallocated to the tune of the starting balance to pay off.  Then you just have to record payments as account transfers and fill from income.
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Alex Park, Official Rep

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Hi Andrew,

Thanks for sharing your thoughts with us. First, I've added your request to be able to more easily record non-Debt Expenses to Debt Accounts to our tracker for future consideration.

Next, I detailed in my comment above a bit about why the two types of "expense" are separated. Debt Accounts were intended to 1) be off-budget, and 2) be used to track paydown only, so trying to use them in a way contrary to either of those intentions will require using a workaround. I've provided two such workarounds in my comment, and it seems also like you've found your own way to do that tracking.

I hope that helps and makes sense.