Managing Credit Cards and Debt

Borrowing Accounts and Linked Categories

When you create a new account in Peak Budget and set it as a "Borrowing" account type (Credit Card, Line of Credit, Loan, or Mortgage), the system automatically creates a linked category for that account. This category is crucial for tracking payments and ensuring you stay on top of your debt.

Budgeting Transactions on a Credit Card

When you add transactions to a credit card or other borrowing account, you should budget them against their appropriate categories (e.g., groceries, gas, dining).

On your budget, clicking the Activity column in the linked category will show all transactions for the borrowing account. This view also indicates whether each transaction has been properly budgeted.

Understanding the Available Column

The Available column for the linked credit card category represents the amount of money set aside to pay the balance. This ensures that you have funds allocated for credit card payments and debt reduction.

Setting Goals for Borrowing Accounts

Your goal for a borrowing account should align with your payment strategy:

• Fixed Loans (e.g., mortgages, car loans): Set your goal to match your monthly payment amount.
• Credit Cards: If you pay your balance in full each month, set the goal to $0—your category balances already cover your spending. If you are paying down debt, set a goal based on how much extra you want to pay each month.

Activity Column Calculation

The Activity column for a borrowing account shows:

• The total of all budgeted expenses made with the account.
• Minus any payments you've already made this month.

This helps you understand how much of your spending has been accounted for and what remains to be paid.

Handling Cash Back and Rewards

If you receive cash back or a statement credit on a credit card:

• Assign the transaction to the linked credit card category.
• This will reduce the Activity column and the Available column, as you no longer need to pay that amount.
• Your Available to Budget total will increase, allowing you to allocate that money elsewhere.

Handling Existing Credit Card Debt

If you start with an existing credit card balance and plan to pay it off in full:

• You need to manually allocate funds to cover the balance.
• Add this amount to the Goal Adjustment for the linked category. This ensures the funds appear as available for payment, even though they were not part of budgeted spending.

By following these steps, you can ensure that your borrowing accounts are properly managed and integrated into your overall budget strategy in Peak Budget.