How Credit Cards Work (Total Debt Mode)

The core idea

Credit cards are tricky because spending and paying happen at different times. Purpose Budget uses Total Debt mode so you can make spending decisions based on your categories (not your bank balance) and still always know what you can safely pay.

What happens when you make a credit card purchase

When you record a $50 credit card purchase categorized to Groceries, two things happen:

1. The Groceries category Activity decreases by $50 (because you spent $50).
2. Purpose Budget moves up to $50 into that card’s Credit Card Payment category so the cash is reserved for your future payment.

Why payment categories exist

A payment category is your "reserved cash" for that specific card. It keeps you from accidentally spending money that you’ll need when your credit card bill comes due.

Paying your card

When you pay your card, record a transfer from your checking account to your credit card account. The amount you can pay safely is shown by the available amount in that card’s payment category.

If both accounts are connected to your bank, the payment imports twice — an outflow from checking and an inflow to the card. Purpose Budget can suggest that pair for you, but the link is always your call: open the suggestion on the transaction and approve it, or dismiss it. (Approving the matching bill under Bills & Subscriptions approves the payment suggestion on that transaction too.) Approving links the two rows and puts the checking outflow in that card’s payment category. If the suggestion is wrong, dismiss it and link the right pair yourself from the Transactions page — which is also what you do if no suggestion appears (see Matching Duplicate Transactions).

Protected funds (and what happens when you lower a budget)

In Total Debt mode, money moved into a credit card payment category is set aside for paying the card. It depends on the spending category for that month: if you lower that category’s Assigned so it no longer covers its card purchases, less money stays in the payment category and the card can show as Underfunded until you cover the rest.

Refunds and returns

If you return something you bought on a credit card, categorize the refund to the original spending category. Purpose Budget will reverse the reserved amount appropriately so your spending category and payment category stay consistent.

If a refund or reimbursement reaches a budget bank account in the same month as a card purchase that wasn’t fully funded, categorize the inflow to Ready to Assign, then assign that money to the original spending category in that month. Categorizing it directly to the spending category can clear its overspending without adding money to the card’s payment category. If you already categorized it there, recategorize the inflow before assigning it.

When things go wrong: Underfunded cards

If your Credit Card Payment Available is zero or more but less than what you owe on the card, Purpose Budget flags it as Underfunded. This can happen from overspending, moving money away, or carrying pre-existing debt. If that Available drops below zero instead (for example, after you pay the card more than was set aside), the category shows as Overspent rather than Underfunded.

Next: Underfunded Credit Card Payment (What It Means).

Want the step-by-step version?

The Learn guide includes examples and routines: Credit Cards in Purpose Budget.