Why & How I Use Credit Cards with Envelope Budget
I have a couple of credit cards I use for spending. Both are American Express (AMEX) cards I use for benefits and rewards points.
- American Express offers a warranty on all purchases. I’ve only used this once, but it was great. I bought my kids iPods for Christmas a few years back. One of my children dropped their sibling’s iPod on the tile floor 2 days later and shattered the glass. I contacted American Express and they basically refunded me the amount of that purchase so I could go buy a new one.
- I’ve had a few instances of fraud with cards. When this happens I have found American Express very quick to deal with it and reverse charges. I am sure my bank will do this, but honestly it makes me more nervous when using a debit card where it affects my checking account directly. I feel like I have more of a buffer with the credit card and a little more time to resolve the issue.
- I use a Costco American express card. I basically got this for convenience just to use at Costco. Instead of pulling out my membership card and my debit card, I just use one card when buying groceries or filling up with gasoline.
- At Costco I get additional cash back when I use my Amex card. I generally get a check every year from Costco for around $350 dollars around February or March.
- I use a Blue Cash card basically everywhere else that takes American Express. For Christmas in 2014 we used our points to get $600 worth of Amazon gift cards and $200 with of Old Navy cards. So basically our rewards paid for Christmas.
Envelope Budget Integration
I use OFX Direct Connect to import transactions from American Express into Envelope Budget. I simply use my web username and password to connect. It is very simple.
When a new transaction comes in, I simply assign it to the related envelope as I would with a debit card purchase.
Here is the KEY, I have automatic payments set up to pay off the balance each month on the card due date. If you are late on a payment they hit you hard and the points are no longer worth the risk. If I can’t pay off the balance each month, then I shouldn’t be using credit cards.
So when the automatic payment is transferred from my bank account to pay off the balance of my American Express card I get two transactions imported into Envelope Budget, one is a withdrawal from my checking account and the other is a deposit into my American Express account.
I have an envelope named “Bank Transfers” where I put both of these transactions where they balance out to zero.
Debt Mixed with Monthly Spending
Some have asked how to handle this if they have a balance on their credit card and continue to use their credit card for payments.
There is no built in way to handle this type of spending, but there are some things you can do in Envelope Budget to help you.
A simple way to see how much you have spent on a credit card is to do a transaction search.
- Click the “More Search Filters…” button
- Select the date range (Month to date, last 30 days, or custom for example)
- From the Bank Accounts drop-down select the Credit Card
- In the Type select, choose “Withdrawal”
- Click the “Search Transactions” button.
You will see all the transaction results. At the top of the list you will see a summary of how much you have spend in that date range for that account. You can then use this amount to know how much to pay towards your credit card to cover the spending for that date range.
One thing you could do is to open another credit card account and do a balance transfer. Often you can find cards that will give you 0% interest on balance transfers for a given period of time (6 months or a year). You could then track this debt separately and even make use of the debt snowball tracker in the “Get out of debt” center. This will give you a little more time to pay it off while not incurring the interest fees.
Then, with your balance on your new card you could track your credit card spending as described above.
I would be careful playing the balance transfer game though – especially if your goal is to improve your credit score. Opening new cards might do more hard than good in some situations. If you are going to employ this method, I recommend only doing it once and be diligent in working to pay it off.
If you plan on carrying debt on a card perhaps you should just call it what it is. Create a new envelope title “Credit Card Debt”. Any transactions that you do not plan to pay off if that billing cycle would go in this envelope along with any fees you incur from your bank.
When you are ready to start paying down this debt, you would make allocations to this envelope when you are allocating your paycheck. Whatever amount you allocate you would then pay towards the credit card debt. You would still have two transactions come in and you would put both to “Bank Transfers” that would balance out.
Hopefully all these scenarios make sense and you can see how flexible Envelope Budget can be to suite you needs. If any of this is unclear, please leave a comment and I can try to clarify or even create a quick tip video explanation.