Managing Credit Cards
Credit cards let you make purchases now and pay for them later. In your budget, the important question isn’t just what you spent—it’s whether money has been set aside to pay for those purchases.
This article explains how credit card spending, payments, refunds, and balances work together so you always know what you owe and what you’re prepared to pay.
The Linked Credit Card Category
Every credit card automatically gets a linked category when the account is created.
On the budget, this category represents money reserved to pay your credit card. The Available amount answers one simple question:
How much money do I currently have set aside to pay my card?
This category increases when purchases are funded or money is assigned, and decreases when payments are made.
Making Purchases on a Credit Card
When you make a purchase using a credit card, you categorize it just like any other transaction. What happens next depends on whether the spending category was funded.
Funded Purchases
- You assign money to a spending category.
- You make a purchase on the credit card.
- The spending category balance decreases.
- The same amount is automatically added to the credit card category.
Result: The purchase is fully covered, and money is set aside and ready to pay your credit card balance.
Unfunded Purchases
- You make a purchase without enough money in the category.
- The spending category goes negative.
- No money is added to the credit card category.
Result: Your debt increases, but no money has been reserved to pay it yet.
Paying the Credit Card
Payments are recorded as transfers to the credit card account.
When you make a payment:
- The credit card balance decreases.
- The Available amount in the linked category decreases.
The linked category tracks how much money is available for payment. Making a payment uses that availability.
Refunds and Cashback
Refunds and credits reduce how much you owe, but they are handled differently depending on what they represent.
Refunds
- Categorize refunds back to the original spending category.
- This restores the category balance.
- The amount you need to pay on the card is reduced accordingly.
Cashback and Statement Credits
- Categorize cashback or statement credits to the credit card’s linked category.
- This reduces the amount of money needed to pay the card.
- If the credit exceeds what you owe, the extra becomes available to assign elsewhere.
Paying Off an Existing Balance
If your credit card starts with a balance, you can assign money directly to the linked category.
- That money sits as Available for payment.
- Payments reduce both the balance and the available amount.
Many people set a monthly goal on the credit card category to steadily pay down an existing balance or ensure regular payments are made.
Common Usage Patterns
- Paying in full every month: Purchases are funded, and payments use the money that was set aside.
- Carrying a balance: Some purchases may be funded while others are not, and extra money can be assigned to reduce the balance over time.
- Overspending and catching up later: Categories may go negative first, with money assigned and payments made later to bring things back into balance.
Summary
- Every credit card has an automatic linked category.
- Funded purchases move money into that category.
- Payments reduce both the card balance and the available amount reserved for payment.
- Refunds and credits reduce what you owe.
- The linked category shows how much you are ready to pay at any moment.