Making a Debt Payment: Principle vs Interest

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  • Updated 3 months ago
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I'm having an issue making my credit card debt account balancing when I make a payment and I've split the payment between Principle and Interest. (I couldn't find a similar question/answer).

Some background and my steps:

* I track my interest of my credit card debt account each month when it is charged to my card. I use Add Transaction in my mobile, it kicks me to the website, select Add Interest in the dropdown, and input the interest amount.

*I have a Debt Envelope that I allocate funds to, to show what money will be used towards my next payment.

*When I need to make a payment, I'm back on the website, select Payment in the dropdown this time.... And this is where it gets confusing:

- if I put everything against the Principle, the credit card balance is accurate. However, the debt tracking bar says I've put $0.00 towards the Interest
- so if I put in the Interest field the amount of interest I added earlier as a transaction and the rest of payment towards the Principle, the credit card balance is only reduced by the amount in the Principle field... But it does show that I've put x dollars toward the interest. But I need an accurate balance.

E. G. My balance is $100. I add interest of $20. My balance is now $120. I then want to make a payment of $30, allocating $20 to the interest and $10 to Principle. When I make the payment, my balance shows $110, even though my $30 payment should bring it down to $90.

Am I using the debt tracking wrong? Should I NOT add the interest as a transaction if I am adding it in during the payment?

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Posted 3 months ago

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Photo of Alex Park

Alex Park, Official Rep

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Hi Cheryl,

Thanks for your question. The conclusion you seem to come to at the end of your post is correct -- to have Goodbudget display the correct numbers across the board, what you'll want to do is not enter your Interest until you actually pay it off when you make the Debt Payment Transaction. In this way you won't enter the initial increase in balance from the Interest, and only put the Interest split in when you pay.

If you'd still like to keep track of the Interest hitting your account, what I might suggest is adding the Interest as an Interest/New Free transaction as you have been doing, but then deleting it before you add your new Debt Payment transaction for the period / month. This will let you see the right balance all month, but then deleting it before your payment will help it show the correct and accurate numbers.

Hope this helps!