One of the great things about YNAB is that it allows you to use your credit card like a debit card. If the things you buy with your credit card are covered in the budget, YNAB moves the amount of the transaction from the budget category to the credit-card payment category while it waits for you to pay your credit card. Unless you’re carrying a balance, your credit card balance should match the credit card payment amount in your budget. That allows you to autopay your statement balance. Honestly, after dealing with the stress of credit card debt for years, this is bliss for me.
If you carry a balance in YNAB, you have to assign money from Ready to Assign to your credit card payment to chip away at your debt. And you need to budget for credit card interest as well, so that your payments reduce your credit card balance.
Since YNAB allows you to use a credit card without going into debt, you may want to use your credit card rather than a debit card. That way you can get the extra protection that credit cards offer. And you can get rewards. I know some people enjoy spending time maximizing their rewards. Me, I just let them accumulate until I notice and then I can cash them in. Doing that, though, can feel a little trick in YNAB until you know what to do.
You have a couple of options in YNAB (and perhaps there are others I don’t even know about):
- Redeem for cash and send the money to your on-budget checking account. When it hits your checking account (and YNAB), categorize it as Ready to Assign (RTA).
- Redeem for a statement credit. When the statement credit comes in, you’ll also categorize it as Ready to Assign. But the money won’t appear in the RTA at the top of your screen. Instead YNAB just reduces your credit card balance. If you’re carrying a balance, that’s handy. If you’re not carrying a balance, then you will end up with more money in the Credit Card Payment bubble than you need to pay off the credit card. So then you can just move the excess (the payment amount less the credit card balance) to another category.
I find dealing with statement credits in YNAB tricky enough that I always redeem my reward for cash, rather than a statement credit. But I don’t carry a balance on my credit card. If I did, I would probably use the rewards to reduce my balance and speed up paying off my credit cards. That also has the benefit of taking away the temptation to use the money for something else.
One last reward-related tip: Some credit cards provide reward points that can be used for Amazon purchases. But you may get less money toward an Amazon purchase than you would if you cashed out the reward. For example, on my Chase Ink credit card, I currently have 9620 reward points that are redeemable for $76.96 in Amazon purchases. If I redeemed them for cash, I would get $96.20. But my Amazon Prime Visa from Chase has a one-to-one points ratio. 500 points equals $5.00 on Amazon.) One benefit to redeeming for cash is that whatever I purchase with the money will be included in my YNAB records. Purchases made with points don’t make their way into YNAB.
Leave a Reply