how to account for cc charges

[jodi]

A question for those who track expenses: How does everyone account for charges on ccs? I used to not note the charge when it was made, but instead would note the payment when it came out of my account. However, when I was tracking expenses, the paymount amount didn't tell me what the original charge was for, so I changed my method to account for the charge in the month it was made instead of the month it was paid off. An example: DH's tuition. When I paid it back in the fall, I listed a $5k charge under school expenses. However, now I have no category to list the $100-300 I am putting toward it every month. I could create a category for cc payments, but then it would look (on paper) like I was paying for the same thing twice. However, if I don't account for the charge when it was made, then I lose track of what that $5k went for. Any suggestions?

[humandraydel]

Re: how to account for cc charges

Well, I think some of it is personal preference. I put nearly everything on my credit card and therefore track the expense as it happens. Then the credit card gets paid off. I can see how the situation would be different for something like tuition which gets paid off over time. In that situation I would probably do something like this - list the expense monthly with either the total balance or remaining balance:

February
Tuition (5k total on CC, 3900 balance) - $200

[project15]

Re: how to account for cc charges

For student loans, I treat them like a bill. I pay the same amount every month until it goes away (10-12 years :ugh: )

[jodi]

Re: how to account for cc charges

project, I do keep track of my student loans in my "loan" category. However, this expense is a $5k cc charge for tuition (at 0% for a year, compared to a much higher interest rate if I had taken out a loan). I originally put the $5k under my "education" category, but now I find that I am paying several hundred each month on the cc with no method of accounting for where that money is going in my monthly cash flow record.
humandraydel, good idea. I don't think I can do that now, since I already accounted for the $5k spent, but I can do it if I am in this situation again.
Any other methods that I might not be thinking of?

[tinapbeana]

Re: how to account for cc charges

does your software allow 'subcategories'? i use a freeware program called Money Manager EX. when you set up categories, it allows you to have sub-categories underneath them that get reported. for instance, in my setup i have a 'debt' category and underneath that i have subs: student loan, credit card, inlaws, honda card. when i put in say my student loan payment, the category shows up as debt: student loan. when i check the report "where does the money go?" i see debt:student loan, debt:credit cards, debt:inlaws, etc.

i mention this because you could set up this software (or possibly the one your using) to have a category for "Credit Card A" with subcategories for Tuition, Regular Expenses, Impulse Purchases (or something like that). even though you might be sending in say a $500 payment, you could break it down in your software to say

Credit Card A: Tuition: 300
Credit Card A: Regular Expenses: 150
Credit Card A: Impulse Purchases: 50

[MonkeyMama]

Re: how to account for cc charges

I have quicken so it makes it easy to track. Essentially everything is assigned an expense category when charged. Then when I make the cc payment it does not show up on my budget at all.

Some things I do to make it work is I know it should be in the range of $1200-$1300 to be in budget and have money for everything else. So if everything is in budget that is where I land. I have some items that clear the card up to the 4th - closing date - but I date everything that closes before then to the prior month, even if it was a charge on the 1st - just keeps it simpler. So for budgeting expenses I track the actual charges. & then for payment, if everything is on/under budget I will have the cash to pay it with my first check of the month.

It took me a long while to wrap my brain around this and get on track. When my e-fund is more significantly funded I think I am going to set aside money the first of every month to pay the next month's bill, just to keep the ecpenses and the payment all in the same month. I don't want to prepay the card so I Am trying to figure out exactly how I want to structure it - but an idea I am working on. I would essentially like to pay everything in cash, but keep the cc for rewards so it has been hard for me working it into a cash framework - but I Am getting there.