One of the genius things about YNAB is the way it handles credit cards. Let’s say you spend $50 on food at the grocery store. In the credit card account, you categorize that $50 into the groceries category. Assuming you have the money in your groceries category, YNAB will move $50 from your groceries category to your credit card payment category. Then, when it’s time to pay your credit card, the money is ready and waiting.
It can be a little hard for new users to grasp this concept, but once you do it makes using a credit card worry-free. As long as your spending is funded in the budget, you’ll never go into credit card debt and you’ll never pay interest.
This makes using your credit card just like using a debit card. If you used your debit card without sufficient funds in the bank account, you would incur fees. It feels horrible and it’s something we all try to avoid. The same goes for credit cards: If you use your credit card without having money to cover the charge, you incur fees in the form of interest and stress-inducing debt. This is more normalized in our society but it’s something that can be avoided.
There are advantages to using a credit card over using a debit card. Credit cards can offer rewards. Using them responsibly can help build your credit score. And they offer protections that debit cards don’t.
So go ahead and use your credit card, but treat it like a debit card: Don’t spend unless you have money to pay. YNAB helps you be sure you have money to pay. If there’s money in your spending category (or you can move money around in your spending plan to cover the spending), go for it. When all your credit spending is covered, the Available bubble in the credit card payment category matches your credit card balance and is a reassuring green.
When you use credit cards this way, you can say goodbye to expensive interest charges. And you gain peace of mind as you live more spendfully. It’s a great way to live!
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