Carrying Debt

Carrying debt on a credit card refers to the situation where you have an outstanding negative balance on the card and do not have the money set aside for paying it off in full when the next bill arrives. We highly recommend that you do not do this for any new spending as it becomes super easy to accidentally fall into deeper debt. Instead, we recommend that you follow the Within the Budget strategy for any new credit card purchases. But in case you're already carrying a negative balance on a credit card, this page will outline how to safely manage the debt without having to worry about going into more debt.

If you have an existing credit card debt that you need to track and gradually pay off then it's very important that any new purchases you make with the credit card are pre-funded following the Within the Budget strategy as there is no point in paying off 100 extra on the credit card if you will then have to put another -100 on the card to pay for groceries the week after. Instead you should prioritize making sure that your actual expense categories are funded before allocating money to paying down the debt, which will allow you to ensure that you're paying it off in a sustainable manner without accidentally incurring more of it over time.

The simplest way to track preexisting credit card debt in Actual is to create a Credit Card category and set it to Rollover overspending. When you add your existing starting balance and any preexisting transactions to your credit card account you need to ensure that the category of those transactions is set to Credit Card. That way you can at any time look at the Credit Card category balance to see the status of your preexisting debt, and you can ensure that it's getting smaller over time.

Each month when you do your budgeting, after you've accounted for all other necessary expense categories, you allocate however much you want to pay down on that debt into the Budgeted column of the Credit Card category. Then when you go to pay your credit card bill you can easily find out how much you should actually pay by taking the Credit Card account balance and turning it positive and then adding the current Credit Card category balance to it. If your account balance is -5500 and your category balance is -4500 then you know that you need to pay off 5500 - 4500 = 1000. This amount will be greater than what you had put into the Budgeted column in case you're simultaneously following the Within the Budget strategy of pre-funding new credit card purchases, and you can without worries pay off the calculated amount knowing that the money has already been explicitly set aside for this specific bill.