I finally have developed my own personal list of categories and subsequent groups with those categories. So i have gone through all my transaction and have categorize them accordingly, including purchases made with credit cards have been. I’m stuck in deterring how to properly categorize/group “interest charges on purchases” and how to designate it (income/expense/transfer). Any ideas?
I’d probably categorize it as
Interest Expense. It would be an expense category.
You have to pay this interest charge just as you have to pay for something you bought.
You can call it whatever you want, but it absolutely needs its own expense category. It is an outflow of cash so it is definitely an expense.
I assume you are talking about charges for not completely paying off your credit card every month. Tracking this separately will allow you to see how much you are spending on this interest. No disrespect intended, but you should strive to get this outlay to zero. Hopefully, Tiller will help you see your financial picture more clearly and allow you to make appropriate decisions based on what you see.
I hope Tiller is what you are looking for. If you invest the time, it will be an eye-opener.
I call it Interest and have it set as an Expense, but hidden.
Because other than a card I pay off each month, I’m more interested in seeing the payment to the credit card than the individual expenses on my budget. It’s about debits and credits and accounting for them properly.
If I spent $100 on Clothes on Amazon with my card, I’d have a $100 charge. If I pay it off, there’s no interest and I want to see that as Clothes on the budget.
But if I have $1000 balance on another card that I’m not using and paying down, I want to see the $100 payment on my budget. The monthly interest of $10 adds to the balance and will be reflected in the payments. So it’s captured as interest via categories, but hidden from the budget.
If I had a mix of these scenarios, I’d probably have two interest categories so I could capture it properly for budgeting purposes.
Hope this helps. I am NOT an accountant, just a nerd with a spreadsheet!
That is perfect,