How to Do Credit Cards in YNAB

And Ultimately Be Debt-Free ...


Like your friend Brittany, credit cards in YNAB can be a little extra. Credit cards in YNAB don’t have a positive balance that feeds the budget like checking and savings accounts. In fact, more often than not, you have a negative balance waiting to be paid off.

Prefer to watch instead of read? Watch this video on setting up credit cards in YNAB.

Let’s say you have a -$2,400 balance on a Visa card. While you might not be able to pay it off right now, you do know you can make a payment of $300 each month to chip away at that balance.

When you set this up in your YNAB budget, you’ll see a new account listed with a negative balance of -$2,400 showing up in red text. Plus, you’ll also get a Credit Card Payment category added to your budget itself with a monthly target amount of $300. See what that looks like in the video below:

How to add a credit card in YNAB and pay off the amount over time.

See how these new budgeters set up credit cards in their YNAB budget.

What Happens When I Buy Things With My Credit Card?

When you spend money on a credit card, you create a little bit of debt. Did you buy that gum? Well, sort of, but you haven’t actually spent any of your money. The credit card bought the gum for you and eventually you will pay them back. That’s debt

The important thing is that you reserve the money to pay off that debt, and that is what your YNAB budget is designed to do. Here’s how it works, using that gum (yes, silly) as an example:

  1. When you add a credit card to YNAB, a Credit Card Payments Category is automatically created.
  2. Assign some money to your groceries category (using money you already have!).
  3. When you swipe your credit card to pay for the gum, enter a spending transaction for groceries in your credit card account. When you do this, the money to cover the gum purchase will move from that Groceries category to your credit card payments category. Automatically.
Buying gum at the grocery store and paying with your credit card? Money will move automatically from the Groceries category to the Credit Card Payments to prep for your future credit card bill.

Now, your money sits there in the Credit Card Payment Category. Twiddling its thumbs. And that’s a good thing, because in this world nothing is certain, except death and taxes…and your credit card bill. Here’s how to do that last one in YNAB:

But What About Credit Card Interest?

Now, some of you may be asking, “OK, I get that, but my credit card company charges interest. How do I handle that?”

Interest is the fee that your credit card company charges you for extra time to pay off debt. Pretty much the only good thing about interest, is that it might motivate you to pay off your debt faster to avoid the extra charge.

As with any expense, you need to budget for interest payments. To do this, set up an “Interest” category in YNAB. If you don’t know exactly how much the interest will be, budget a little more than you expect.

Then, when interest hits your credit card balance, record it in your credit card account, just like any other expense. Instead of buying groceries (or something fun), you’re buying more time to pay off your debt.

Eyes on the Prize

The faster you pay off your credit card, the less interest you’ll pay, so be aggressive! YNAB is designed to help, that’s why our software handles credit cards this way—we want to help you focus on budgeting your cash, and avoid going further into debt, so that you can finally be debt-free!

Want More Help With Using Credit Cards in YNAB?

Our wonderful teachers offer free, live classes and have workshops specifically to master your credit cards and create a debt paydown plan.

Browse Workshops