Credit Cards in Purpose Budget

Why Credit Cards Are Different

Credit cards create a unique budgeting challenge: you're spending money you don't technically have yet. When you swipe your credit card for $50 groceries, no cash leaves your bank account immediately. But that $50 is still a real expense that needs to be paid later.

This disconnect between spending and paying is where most budgeters get into trouble. They spend $500 on their credit card, see $500 still sitting in their bank account, and accidentally spend it on something else. When the credit card bill arrives, they don't have enough to pay it off.

How Purpose Budget Handles Credit Cards

Purpose Budget uses a system called Total Debt Mode that automatically protects your credit card payments. Here's how it works:

Step 1: You Make a Purchase

When you record a credit card transaction (like $50 for groceries), Purpose Budget does two things:

1. Records the transaction in your Groceries category (reducing available balance)
2. Instantly moves $50 from your Groceries category to a special "Credit Card Payment" category

Step 2: Money Is Protected

That $50 now sits in your Credit Card Payment category, waiting for when you pay your bill. It's no longer available to spend on other things. This happens automatically for every credit card purchase you make.

Step 3: You Pay Your Bill

When you're ready to pay your credit card bill, the money is already waiting in your Credit Card Payment category. You simply record a transfer from your bank account to your credit card account, and the funds are there to cover it.

Understanding Total Debt Mode

Total Debt mode is Purpose Budget's approach to credit card budgeting. The key principle is simple: once money moves to your Credit Card Payment category, it stays there.

Why This Matters

Some budgeting apps let you "unassign" money from credit card payments when you reduce a budget. This is dangerous because it can leave you without enough to pay your bill. Purpose Budget protects you by keeping those funds locked in.

The Unfunded Badge Explained

Sometimes you might spend on a credit card when a category doesn't have enough budgeted funds. When this happens, you'll see a yellow "Unfunded" badge on that category.

What "Unfunded" Means

The unfunded badge shows the amount of credit card spending that wasn't fully covered by your available budget at the time of purchase. It's Purpose Budget's way of telling you: "Hey, this credit card spending isn't backed by cash yet."

How to Resolve Unfunded Spending

You have three options:

1. Add more money: Budget additional funds to that category from new income
2. Move money: Transfer money from another category to cover the spending
3. Let it carry forward: The unfunded amount will roll to next month as debt to cover

Multiple Credit Cards

Purpose Budget creates a separate Credit Card Payment category for each credit card you add. This means you always know exactly how much you need to pay for each card individually.

How It Works

• Visa ending in 1234: Has its own "Visa 1234 Payment" category
• Mastercard ending in 5678: Has its own "Mastercard 5678 Payment" category
• Each card tracks its own spending and payment balance separately

This makes it easy to see at a glance how much you owe on each card and ensures you never accidentally pay the wrong amount.

Common Credit Card Scenarios

Scenario 1: Paying Your Full Balance

This is the ideal scenario. Your Credit Card Payment category shows $500, and your credit card statement is $500. You record a $500 transfer from your bank to your credit card, and everything balances perfectly.

Scenario 2: Cash Back and Rewards

When you receive cash back or rewards, record it as income to your credit card account. This reduces your balance without affecting your budget categories.

Scenario 3: Refunds and Returns

When you return a purchase, the refund goes back to your credit card. Record this as a transaction in the original spending category. Purpose Budget will automatically reverse the fund movement, returning money from your Credit Card Payment category back to the spending category.

Scenario 4: Starting with Existing Credit Card Debt

If you're starting with credit card debt, add your credit card as an account with a negative balance. Then budget money directly to the Credit Card Payment category to pay down the existing debt over time.

Best Practices for Credit Card Budgeting

1. Add All Your Credit Cards

Don't try to budget without tracking all your cards. Add every credit card you use to get the full picture of your spending and debt.

2. Review Unfunded Badges Weekly

Check for unfunded badges at least once a week. The sooner you address unfunded spending, the easier it is to find the money to cover it.

3. Pay Your Statement Balance

Whenever possible, pay your full statement balance. Your Credit Card Payment category tells you exactly how much cash is available for payment.

4. Don't Budget to the Credit Card Payment Category

Unless you have existing debt to pay off, don't manually budget to your Credit Card Payment category. The automatic fund movement handles this for you. Manually budgeting there can lead to overpaying or confusion.

5. Trust the System

The automatic protection might feel strange at first if you're used to other budgeting methods. Trust that Purpose Budget is tracking everything correctly. The money is there when you need it.

Why This Approach Works

Purpose Budget's credit card handling eliminates the most common budgeting mistake: accidentally spending money twice. By instantly moving funds when you use your credit card, you always know your true available balance.

• No surprises: Your credit card bill is always covered
• Clear visibility: Unfunded badges show when you need to take action
• Automatic protection: Funds are reserved without any extra work from you
• Multiple cards: Each card tracked separately for clarity

Credit Cards with Bank Sync (Premium)

Everything described above works identically whether you enter transactions manually (Essential tier) or have them import automatically via bank sync (Premium tier). The key difference is how transactions arrive in your budget.

How Bank Sync Enhances Credit Card Budgeting

With Premium, you can connect your credit card accounts via Plaid. When you make a purchase, it imports automatically within 24-48 hours. The moment the transaction appears, Purpose Budget applies the same Total Debt protection:

• Automatic import: No manual entry needed for CC purchases
• Same fund movement: Money moves to CC Payment category instantly when transaction syncs
• Real bank data: Exact merchant names and amounts from your bank
• Never miss a transaction: Every CC purchase is captured automatically

Automatic Payment Matching

When you pay your credit card bill from your checking account, both sides of the payment import via Plaid. Purpose Budget automatically handles this:

1. Payment from checking: Imports as outflow from your bank account
2. Payment to credit card: Imports as inflow to your CC account
3. Automatic linking: Purpose Budget matches the two transactions by amount and timing
4. Visual indicator: A link icon shows the paired transactions
5. Auto-categorization: Payment category assigned automatically based on which CC account received the payment

Essential vs Premium for Credit Cards

Both tiers provide the same powerful credit card protection. The difference is in how you interact with it:

Which Tier Should You Choose?

Essential is ideal if you:

• Prefer manual control over every transaction
• Have relatively few credit card transactions
• Value privacy and don't want to connect your bank
• Want to be intentional about recording each purchase

Premium is ideal if you:

• Have multiple credit cards with frequent transactions
• Want to save time with automatic imports
• Prefer exact bank data over manual entry
• Need automatic bill detection for recurring charges