I’ve been a paying user of You Need A Budget (YNAB) for over a year now. However, for the first year, I did not integrate my credit cards into the budget. For one, I had trouble understanding how they integrated. And, I simply wasn’t charging anything to them, only paying them off. So, I removed them and set up a separate expense for dumping extra money into their balances.

I am happy to report that we paid both of them off last month. Now, with fresh zero balances, we decided to start making the rewards card work for us. We charge expenses that we’d otherwise take out of our checking account, and then pay them off out of our checking account before the end of the billing cycle. Collect rewards, avoid interest, maintain and build credit!

However, since we’re now making day-to-day purchases with a credit card, we decided to give YNAB’s credit card linking system another try. Turns out, it’s quite simple. Here’s the gist of it.

When you link a credit card as an account, it shows up in your budget accounts.

READ MORE: You Need a Budget, an Honest Review

When you make a transaction on your credit card, you approve, categorize and clear it just like in your checking account.

Notice that the cleared balance is negative. This is because for this account, you owe the money back!

YNAB automatically moves the money out of the budget category into the available cash in a budget item named after the credit card.

This happens in the budget view:

• The amount of the charge comes out of its budget category and into the credit card payment.
• The amount in the credit card payment balance is how much you have in cash to pay towards your credit card.
• As long as your ‘To be Budgeted’ amount is in the green, you have this money to pay your credit card bill in full.

This helps keep you honest and from carrying over a balance! If you’re in the red, you have a problem.

When you pay your credit card bill out of your checking account, it shows up in your checking account as a transfer, rather than a transaction.

This is because it is moving the positive balance in the credit card budget item to cover the negative in the credit card account.

Now that you understand how to harness your credit cards with YNAB – stay out of debt and make them work for you!

Disclaimer: I am a genuine paid customer of You Need A Budget; I have no affiliate links, nor have I never received anything from the company for this article.