A quick trick for tracking credit card expenses in quicken

Some readers are worried about my change in stance regarding credit cards. Misuse of best rewards credit card was the chief reason I came to be buried in debt. For years after coming to my senses, the only way for me to cope with credit cards was not to have one. I still believe that this is the proper course of action for anyone who hasn't gained control of her finances, and I would never condemn anyone for choosing not to own a credit card.

Now that I have a card again, let me assure you that I'm taking steps to ensure I stay out of trouble. I am not using credit unless I know that I already have money in the bank for the item I'm purchasing, and I'm paying my credit card bill as soon as it arrives. But there's one other trick I've developed that might be useful for some of you who still have credit cards but are afraid of misusing them. Earlier today, Jethro wrote:

With a credit card, your checking account balance does not reflect purchases that have yet to be billed. If you stay within your budget, this shouldn't be an issue… but for a control freak like myself, the fact that the checking account balance is not up-to-date just drives me crazy.

This used to cause me problems, too. One reason I got into trouble before was the lack of immediate feedback about how much had been charged to my credit cards. The spending was invisible and painless. Now when I plug numbers into Quicken at the end of the day, I make two entries for each credit card transaction: one to the credit card account, and one to a “dummy entry” in the checking account, like this:

Here I've just made a payment of $1310.86 on my credit card, which was the full outstanding balance. The remaining $591.73 is money that was charged after the billing cycle ended, and which will appear on next month's statement. In my checking account, I have a “placeholder for Visa” item in the amount of $591.73. This is a constant reminder that I've already spent the money. Every time I charge something to the card, I enter it in the Visa register and increase the “placeholder for Visa” amount.

This one simple trick has made a huge difference in how I perceive the money I've charged on credit. Now I know that when I've spent it, I've spent it!

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james
james
13 years ago

Alternatively, I’d suggest you actually “spend” it from your checking account. Why not log into your CC web account and transfer the money over right then? You’ll lose out on the time value of money, but you’ll be completely unable to convince yourself that you don’t /really/ have to pay the full thing this month — you already did.

JenK
JenK
13 years ago

One advantage to having our Visa from our CU is that I can login, check the balance, and pay anytime during the month. Or multiple times during the month. As long as the item is present and working, I’m good.

I’m sure this can be setup with other online billpay situations.

Cheng-Jih Chen
Cheng-Jih Chen
13 years ago

Doesn’t Quicken have a “Cash Flow Center” that nets out your credit card accounts from your savings/checking accounts automatically, so you don’t have to manually do the netting out?

Also, as JenK says, you should do some sort of transaction downloads for your accounts, just so you have a daily picture of the finances.

Mark S.
Mark S.
13 years ago

Since we use a reward credit card for all our purchases (and pay it off monthly), I put into the checking account a placeholder each month for the average credit card bill and when it needs to be paid. So I can see that on Sept. 3, I need to pay $X to the credit card.

After I get the actual statement, I adjust the placeholder amount to the actual amount.

QuickenNazi
QuickenNazi
13 years ago

In Quicken, I enter the CC transactions when they occur and setup my automatic payments for every two weeks, instead of once a month. I also setup the automatic payment to include the full balance. This week I overpaid my AMEX by $58 b/c I had entered it into Quicken & paid before it hit the account.

David
David
13 years ago

Quicken has some functionality that approaches what you are trying to do here JD. (If I understand it properly). If the account is set up as a credit card: A. Like Chen said, Quicken’s Cash Flow section will net out the cash accounts (checking, savings, and credit cards) where checking and savings are (hopefully) positive and credit cards are negative, thus giving you a net total. B. If you followed the credit card setup wizard, then as an extension of what Mark S. is describing, a scheduled bill will appear in your scheduled transactions section which will always reflect what… Read more »

bethh
bethh
13 years ago

I’ve been having trouble with my credit card – *so* close to paid off, then ballooning up by 600 bucks, etc. So now I’m doing what others suggested above – as soon as I make a purchase I transfer the money from checking to the credit card. Of course the result this pay period is that I have $12 in the bank and $20 in my pocket to get me to the 15th, but it’s a good exercise. I do have some backup cash in a savings account, and over the long run I think this will help me be… Read more »

glblguy
glblguy
13 years ago

Great way to manage it, but why the extra hassle, why not just use your debit card or cash? I’m guessing the answer is rewards, but is it really worth it?

As you an probably tell, just not a big fan of credit cards. To me it’s just buying things and paying bills using other people’s money, even if it’s for only 30 days. Would rather use my own money.

Joe
Joe
13 years ago

Very useful comments here. I think it is best to insulate your checking account from errors that could occur with debit card use. If you have a special checking account separate from the one that pays your rent, mortgage, insurance, etc then it could be OK to use a debit card. This post gives one example and there are many more out there. http://consumerist.com/consumer/apple/apple-debits-money-from-the-wrong-account-now-you-cant-pay-your-mortgage-286327.php

Gwyn
Gwyn
13 years ago

My strategy is to make as many purchases as possible using the credit card. Every month, at the *start* of the month I make a single payment on the card for my budgeted expenses. This brings the card into a large *positive* balance. Then as the month goes by the card balance slowly drops towards zero. Usually it stays positive for the entire month. In this way, I never risk getting charged interest, overdraft fees, late payments etc, etc and I’m only ever spending money I know I have (because I’m always in credit). Normally I get paid a small… Read more »

Sam
Sam
13 years ago

I don’t find that my debit transactions lag behind. I use Wachovia Visa debit card and if the check card transactions have not processed the pending transactions are captured under pending check card holds (or something like that) and are reflected in my available balance.

I like Gwyn’s plan but don’t see the advantage vs. debit except for rewards (I receive rewards for using my Visa debit).

Daniel
Daniel
13 years ago

I agree about this failing of Quicken, so I wrote my own Excel workbook to track it. Actually I use no fewer than 5 workbooks (in addition to Quicken) to track my finances. (Sounds like a Type A, doesn’t it?) 😉 Anyway, I have two main checking accounts – one for bill payment (credit cards, loans, monthly bills) and one for my regular monthly spending (which is typically done only with cash or debit). For the second account I use something like the envelope method in one of my workbooks. I have one sheet in the workbook for each category,… Read more »

brad
brad
13 years ago

The Cash Flow Center doesn’t exist in Quicken for Mac, which is what J.D. uses. Yet another reason for us Mac users to consider switching to the Windows version, although I still have trouble convincing myself to put my personal financial information on a system as vulnerable as Windows.

Daniel
Daniel
13 years ago

Brad, another idea would be to do what I did: design an Excel workbook/spreadsheet to track cash flow. I personally think that is a better option than switching to Windows. 😉

Mrs. Micah
Mrs. Micah
13 years ago

I like that. I work with Excel for my financial records, but I think I could do much the same thing there. I’ve managed not to have a credit card yet, but I’m hoping to get a reward one from my favorite craft store and pay off the balance each month (use it @ the store for extra points and for occasional other purchases).

Until now, though, I’ve been wary of them. During most of my childhood my parents were paying off a big credit card debt. I grew up thinking that they were scary cards.

-MM

Cheap Like Me
Cheap Like Me
13 years ago

I do the same kind of thing.

To budget for debit card use, I also enter a placeholder figure in Quicken that’s the amount of several budget categories (e.g., groceries and clothing) that I plan to pay with a debit card during the month. Then I can see what my ending balance will be after all bills are paid. As I make each purchase with the debit card, I subtract from the total budgeted so I know what’s left.

Dave
Dave
13 years ago

I was reading these comments and thinking that a lot of people were giving many of the benefits of leveraging their money with credit cards, just to maintain tighter controls over their cash flow. Then I saw Daniel’s solution. I think he’s found the right answer. Let’s say I’m going to spend $1000 on something. My choices are: a) pay cash now, lose the potential interst on that cash but not have to worry about screwing up my credit somehow; b) put it on the credit card, then immediately pay the credit card (this is what most people seem to… Read more »

Daniel
Daniel
13 years ago

Thanks Dave. Yeah, that solution evolved for me over a period of time. At first, my spreadsheet was used to help me get out of CC debt: when I was in CC debt, I needed to be able to predict where I would be at the end of the month, so that I knew how much I could pay to my CCs and still have a little bit of money at the end of the month. Now, it tracks much more than that. For us (me & my wife), the trick is in using the two checking accounts – one… Read more »

KM
KM
13 years ago

You guys are making this too complicated. Quicken is a nice program, but it is wayy too powerful for simple personal finance stuff like tracking expenses. I use EZ Money, a free, open source program that works on OS X and Windows (I’m sure you can compile it in linux). You can find it at http://adoracom.com/ezmoney/eng/index.html When you enter a transaction (purchase/deposit/payment/etc), there is a checkbox called “pending”. You can then easily see which transactions are pending (not yet charged) and which ones have been charged. It also gives you a Balance and Actual number at the bottom… the Balance… Read more »

Jesse
Jesse
13 years ago

Here’s what I do, similar to what many of you seem to be doing, but I make a *little* money off of it. I use my BOA CC for almost every purchase, and when I get home from shopping, I transfer the amount of the purchase from my BOA checking account to my BOA savings account (this is the only purpose for that savings account, longer term savings get a better return at an online bank). Then, when my credit card payment is due, i transfer the money from my savings account to my credit card. This nets me a… Read more »

vh
vh
13 years ago

For quite a while, I used dummy entries in my Quicken checking account to track charges against paycheck income. However, this got complicated, for a variety of reasons. Much easier is to do something along the lines of what Daniel describes. My credit union offers a money market checking account with a halfway decent interest rate, and you get access to all your credit union accounts online. So, I opened a money market checking acct to complement my personal checking acct. In the personal checkng account, I keep enough for utilities, monthly insurance bills, and the occasional workman who has… Read more »

Bill St. Clair
Bill St. Clair
13 years ago

I did that with my first credit card in the late seventies. It kept me from going into debt. I entered my credit card charges in my (paper) check register, and kept two balances, the bank balance, and the balance after paying off credit purchases. Nowadays, I use a debit card instead of a credit card so the bank’s idea of my balance matches reality.

Colleen
Colleen
13 years ago

I really like this trick. I will make a new entry on my spreadsheet for this tactic. I use docs.google.com and I set up a spreadsheet there. It’s free and I can totally customize it, although it did take me a few months to figure out how I wanted it set up. And I do see the logic behind wanting to use a credit card over cash – to add up rewards points. That could come in handy if you’re saving for gas points or travel points. But it’s true, you don’t want any of that charging to carry over… Read more »

Jason
Jason
13 years ago

How about this? Use a debit card.

I agree with glblguy, using debit or cash is better. It’s been proven that people spend more than they intend when they use CC’s.

Dan
Dan
13 years ago

In Quicken 2007 for Windows, I enter every transaction and have all my accounts in there. When I enter credit card transactions, my CC balance becomes negative, as it should. I can see how much money I will have left when the CC bill is due in the ‘cash flow center’. So, if I just charged $100 and have $1000 in checking, it will show $900. There is an option, if you right click on the account name, to not include certain accounts in totals, this way it doesn’t add my IRA or savings to the net worth figure, just… Read more »

Maxim
Maxim
12 years ago

Proposed approach is wrong and complicated. There is no point of recording same transaction twice. And, by the way, credit card purchases are not cash purchases and you can’t mix them up with you checking account transactions. Quicken already has all tools that you need to track your credit card debt. 1. Set up credit card account in Quicken and record all credit card transactions in this account. 2. When you make credit card payments record them as Transfers from your checking account to credit card account. 3. Keep an eye on Cash Flow and Income Statement and Net Worth… Read more »

KW
KW
12 years ago

I agree with Maxim’s comment here about how to use Quicken with Credit Cards. I do this and one thing I would add to these many comments about Quicken is that I use the budget feature to track my spending. I spend every penny I can on my cc because of the rewards…BUT I have already established the habit of not spending the money if I don’t have it in the bank to pay the bill. So I download my cc transactions to Quicken, categorize them properly, and then use my budget reports to see if I have money left… Read more »

Anre Rodrigues
Anre Rodrigues
4 years ago

Using an Excel spreadsheet, I divide each 30-day billing cycle into four “chunks” corresponding roughly to weeks (it’s actually three 8-day chunks and one 7-day chunk). Dividing the amount deposited per billing cycle by 4, I get about $375 per week-long “chunk.” I create 4 columns, each starting with $375. Every few days or maybe once a week, I enter the amount of each charge as a negative number in that week’s column.

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