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Credit Card Points and Rewards

There are many different types of rewards offered by credit card companies.  In this article we’ll focus on:

  • Frequent Flyer Miles
  • Cash Rewards
  • Points

Frequent Flyer Miles

Frequent Flyer miles are a loyalty program offered by airlines where you track how many miles you’ve flown and then redeem those miles for additional flights.  Sometimes you can earn miles by using a credit card for purchases as well.

Typically, miles earned are directly traded for travel.  If this is the case, you should leave this out of YNAB.  It’s always best to enter income and spending that actually occurs, creating a mirror of your account statement.  If the miles you earned were not converted into cash, then there’s nothing to enter in YNAB.

If you have to pay any fees or taxes associated with the flight you earned, then you should budget for those expenses and track the spending accordingly.

Cash Rewards

Sometimes your credit card will issue cash rewards in the form of a credit to your account.  This will either lower the balance of what you owe, or if you don’t owe anything, result in a positive balance on your account.

In YNAB, you should enter this as income, because that’s what it is.  It’s a little hard to understand this since you never “see” the money.  However, it’s no different than if the credit card company handed you cash dollars. 

Let’s say you have a balance on your credit card of $1000.  Your credit card company issues you a cash reward of $50.  You can send them $50 less now, and that money is freed up for other categories in your budget.

If you owe Pre-YNAB debt on your credit card, you could budget those dollars there if that makes more sense to you.  However, it really doesn’t matter.  All income is sent to the budget regardless of which account it came from.

Points

You may accumulate points on your credit card for purchases. If your points are eventually converted to cash that is credited to your account, treat that as income when the points are redeemed.  It’s money coming into your budget.

If you trade points for purchases directly, then you can treat this the same as frequent flyer miles and leave it out of YNAB.