How to categorize rent payments from my credit card? (edited)
I have the BILT card from Wells Fargo. If you're unfamiliar, this card lets you set up ACH payment of monthly rent via the card to earn "points" on rent. The card passes this through automatically to my checking account.
For transactions I have the deduction on the Bilt Card, the deposit on the BILT card from checking, and the deduction from Checking.
I recently reset my Simplifi data to start over and I want to get advice on how to categorize these transactions. There are other bills I pay with this card for the points and make payments from checking to the card to match the bill amount.
Should I use the checking transactions for these to categorize the amounts for rent and other bills? If I do that, what categories should I use on the credit card transactions? Should I leave them uncategorized? What is a best practice in this situation?
Best Answers
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Hi @47Minutes
I'm not familiar with this card even though I am also a Wells Fargo customer. It sounds like the rent payment is a pass through and is done automatically without you having to do anything but other charges on the card for other bills you have to set up the payment.
My first thought is to categorize the transactions from the BILT card and all payments (transfers) to pay the card as transfers that are excluded from Spending plan and Reports. My rationale for this is so that you don't end up having these expenses counted twice in Simplifi.
I use three cc to pay almost all of my expenses for the same reason, for the rewards or cash back. I make payments to cover all charges for each billing cycle and don't carry a balance on any of these cards. Two of them are on auto pay because the balance from cycle to cycle is pretty small. The third card gets heavy use and I will schedule payments two or three times during a billing cycle to keep the balance down.
Danny
Simplifi user since 01/22
”Budget: a mathematical confirmation of your suspicions.” ~A.A. Latimer1 -
Hello @47Minutes,
Thanks for posting your inquiry to the Community!
It looks like @DannyB has some recommendations for you, and I just have a question to better understand the situation — does the rent payment show up as a transaction in the credit card account in Simplifi? If so, even though the money is automatically transferred from your checking account to cover the rent payment, I'd suggest categorizing the transaction in the credit card account as "rent", and then categorizing the transfer of funds from checking to the credit card as a "Transfer".
I'd also suggest categorizing any other charges that take place in the credit card account using the applicable Category. You wouldn't want to leave them 'Uncategorized', as you want to be able to track what you're spending money on. Then, when you make your credit card payment, you can track it as a Transfer so those expenses don't count against you a second time.
I hope this helps!
-Coach Natalie
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Answers
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Will setting up the recurring rent payment based on the CC transaction be counted properly in the Spending Plan since the transfer will be ignored from that?
This is what has caused me confusion in the past, getting everything to be counted in the spending plan.
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@47Minutes, it should. If you create a Recurring Series for the rent payment under your credit card account, you'll see that as an expense in the Spending Plan. And when you ignore the transfer of funds from the Spending Plan, no additional expenses will be counted. 🙂
-Coach Natalie
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Follow up…
Credit card payments in general are confusing. The payment from the checking account gets excluded from the Spending Plan. So, how do I factor in those recurring payments to a budget if the debit is ignored from the Spending Plan?
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If the payments are for charges made THAT MONTH, then the original charges were already deducted from the spending plan.
If for some reason, such as paying off old debt, you want your credit card transfers included in the spending plan, you can unhide just one side of the transfer from the 'transfers bucket'. If you unhide the + side, it counts as a credit towards the spending plan, otherwise it counts as a debit.
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Rob Wilkens0 -
The best way i can explain is with an example:
If you bought an item for $10 (that's deducted from spending plan)
And then paid the credit card $10 from that charge and wanted that also deducted from the spending plan, you'd be deducting $20 for a $10 item.
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Rob Wilkens0 -
I like to think of myself as at least of average intelligence, but I really struggle with the Spending Plan concept and credit card transfers.
Let's say income for a given month is $3000. Let's say I have credit card payments each month totalling $500.
In the spending plan, my available to spend for a given month is reflected as Income ($3000) less "bills" and "other spending". But credit card payments, treated as transfers, end up as $0. So the $500 I pay each month to credit cards is not be deducted anywhere from the income. They're not in bills and they're not in other spending. They are in transfers cancelling out both ends to $0.
Does this not mean the spending plan thinks I have this $500 to spend still?
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Paying your credit card bills is not 'spending'. Charging to the credit card is 'spending'.
The spending plan cannot be used to tell you how much you actually have left in any account.
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Rob Wilkens1 -
Ok. I agree with that. But the cost of paying the credit cards is a part of a budget and needs to be deducted from the income to determine available to spend.
If they're excluded from the spending plan because the payments are not "spending", then where in Simplifi is the payment accounted for to reduce the remaining available income in a month?
And I'm not looking for account balance. I can see that with the cashflow forecast. I want to know that the $500 spend on credit card payments is taken into account when showing me "available to spend". It does not appear to be and this is misleading thinking you have more available than you actually do.
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Hi @47Minutes
First, a few questions:
- Do you use your credit card(s) to pay for recurring monthly expenses?
- Do you use your credit card to pay for planned spending expenses?
- Do you pay off your credit card monthly?
- Are you carrying a balance on your credit card(s) for (a) previous purchase(s)?
If 4 is your situation, you will want to set up your credit card payment as a monthly recurring expense and include the transfer in your spending plan.
If 1-3 are the case, you are, in essence, using your credit card as an extension of your checking account. What this means that every expense charged to your credit card is already accounted for in your spending plan. When you pay your rent with the credit card, Simplifi will see that and mark your rent as Paid. When you pay the credit card from your checking account to cover the rent payment you are simply funding the rent payment in arrears, so to speak.
Your checking account requires you to fund your account before making draws on it. Your credit card account allows you to spend money before you have funded the account. One way to think about this is to see your credit card as a means to take an "advance on your paycheck."
Once again, the ONLY circumstance in which you want to include a credit card payment in your Spending Plan is if you are paying off a balance over time treating your credit card as a loan. In this case, I would recommend that you not using this credit card for any current expenses adding to your balance.
If you are using your credit card to pay for current expenses and pay the balance off for each cycle (no balance carryover to the next billing cycle) then credit card payments are nothing more than transfers wit NO impact on our Spending Plan, i.e. net worth per se.
Does that help?
Danny
Simplifi user since 01/22
”Budget: a mathematical confirmation of your suspicions.” ~A.A. Latimer1 -
Your $500 payment to the credit card has already been accounted for in your Spending Plan when you made the individual charges and those individual charges were downloaed, categorized and added to your Spending Plan. The $500 payment to the CC is simply moving cash to cover those already accounted for expenses.
The $500 transfer to your CC is kind of the equivalent to a paycheck deposit to your checking account. Just like the paycheck funding any expenses you pay out of your checking account the $500 transfer to your CC is simpli funding the expenses you paid for using your CC.
Danny
Simplifi user since 01/22
”Budget: a mathematical confirmation of your suspicions.” ~A.A. Latimer0 -
It would help to understand, that the only purpose of the spending plan, is to know "This month, did I SPEND less money than i RECEIVED."
It's not useful for knowing any balances, or anything like that.
Transfering money to a credit card is no different than transferring money to savings, it's not spending, it's moving your existing money around between accounts where it might be spent.
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Rob Wilkens1
