What is the best way to handle credit card cash back rewards?

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  • Updated 3 years ago
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I have some cash back rewards from my credit card and chose the option to have it directly applied to my credit card balance. I recorded it as income on the the credit card account, but it also raises my unallocated amount. How would I go about having it applied directly to the existing credit card balance but not having an effect on the unallocated amount? It's not really unallocated, it's being used towards paying of the existing balance.
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koffiend

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Posted 3 years ago

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Colin Grant

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If you paid 100.00 for groceries using your credit card you would increase your credit card balance and reduce your groceries envelope by 100.00. Your credit card and enveloped are therefore in balance. If you receive cash back on your credit card of say 5.00 the balance on your credit card would reduce by 5.00 to 95.00 and your Unallocated balance would go up by 5.00. If you then move that 5.00 from Unallocated to Groceries your groceries envelope would increase by 5.00 bringing envelopes and credit card back in balance. Hope that makes sense? 

In real life cash back is income so it is perfectly correct that it should be reflected in Unallocated. The fact that it is reducing you credit card bill means it is income that offsets against expenditure so it should be allocated to an envelope that has  been used for credit card spending.
(Edited)
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koffiend

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Yes it makes sense. I was thinking of it more as a payment towards the credit card, instead of being able to keep that amount in my pocket by not having to pay that portion. Thanks for the help.
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Stephanus Aditamaputra

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Usually I record that kind of transaction as New Income, and I choose the "Fill Each Envelope". I return the cash back to the Envelope of which the transaction was, for example cash back of buying gas to Transport envelope, and choose the said Credit Card for the account.
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Colin Grant

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Exactly right. You can do it via the Fill process or you can do a transfer from Unallocated to the envelope of choice. Whatever is best for you :-)