My Crazy Ride on the Credit Card Float

Before YNAB, I went to some extreme lengths in attempt to save money.

For starters, there was my overly complicated spreadsheet where I tracked our grocery spending in detail. From beef to granola, if we bought it, I recorded it. And then there was the collection of money envelopes that I’d hidden in every crack and crevice of the L.A. apartment that I shared with my husband, David. (If you value peace of mind, I don’t recommend this technique.)

It was chaotic, but we were desperate to save up enough cash to move to England. Thankfully, we found YNAB and ditched our spreadsheet/envelope system for The Four Rules.

It was budgeting love, right from the start. And, just a few months later, I applied for an opening at YNAB and was hired as a part-time support rep…

That’s When I Met the Credit Card Float

It was in my early days of employment at YNAB when a new term came across my computer screen: “credit card float.”

“What is that?” I wondered. Context made it obvious that this was something to avoid, so I did a little more research. It turned out that if you’re on the credit card float, you’re effectively living on next month’s income—money that you don’t yet have! And you’re a far cry from achieving Rule Four, to live on last month’s income.

The credit card float is tricky because, on the surface, you might think you’re doing OK. You pay off your entire credit card bill every month (avoiding dreaded interest payments). But the problem is that, once you pay off the credit card, you don’t have enough cash left to live on until your next paycheck…so you’re forced to use the credit card to make ends meet. And the cycle repeats.

It’s possibly even worse than living paycheck to paycheck, and it’s insidious because many people don’t even realize they’re riding the float! And by “people” I mean David and I…

Yep, We Were Floating

Yikes! David and I had always been perfectly happy paying only the statement balance on our card. If we overspent a little here and there, no big deal—we were happy as long as we paid for the charges made during the statement’s cycle. The problem with this mindset is that it inevitably leads to debt.

We charged everyday items, used credit to eat out, and leaned on our cards when unexpected expenses popped up. It was as if we had wiggle room in our budget, but the truth was that we were spending more money than we had. And, unfortunately, I chose to live in denial.

I was vaguely aware that carrying around debt could really hurt us if we were faced with an emergency like, for example, job loss. But we were just so comfortable with our credit card buffer and the fake freedom it afforded us.

Fraud! Fraud! Fraud!

For a full year, I answered questions from YNAB customers about credit cards. I encouraged them to budget for the entire starting balance on their cards. I explained the float, what it meant and how to stop riding it. As time went on, I’d send one of those emails and a red flag would burst forth from my mind and wave “Fraud! Fraud! Fraud!”

There I was, confidently telling others to jump ship before taking on too much water, all the while inwardly panicking because I was too comfortable to leap from my own sinking boat. Again, denial.

And then it happened. Last January, after covering our cost of living, we didn’t have enough money left to pay the statement balance on our card. Without first checking our budget, we made the payment anyway. And then, we did it again the next month. Cue: budget chaos. All those charges had finally caught up to us.

We made it work, but let’s just say that those were some lean months, and it’s still hard for me to look at a grilled cheese sandwich. That was when we decided that our financial health was more important than the ease and comfort of leaning on our credit cards.

Getting off of the Credit Card Float

In the year since, we’ve made a lot of changes:

• We look at the budget (like, actually look at it) before we spend.
• We’ve pushed as many extra dollars as possible towards our credit card while still juggling some student loans, income changes and even relocating to another country.
• We use Rule Three, instead of letting overspending slide to the card. The twinge of pain that we feel when we’re forced to move funds from other categories in our budget to cover overspending has propelled us to keep working hard to stick to our true priorities.

And, last week, we finally made it. I budgeted the last bit of extra to our ‘Credit Card Payment’ category and watched the numbers spin…and then align. After a year of diligent work, we finally had enough cash to pay the balance in full! I actually almost cried.

Not only have we accomplished something for ourselves, but now I have the pleasure and privilege of coming alongside other YNABers and saying, “Hey, I’ve been where you are, and I know it’s hard. It will take some time and serious effort, but you can do it. And the payoff will be worth it.”

If you need a little help getting started with tackling your own credit card debt, drop into one of our free, online workshops—Master Credit Cards with Your Budget, Credit Card Overspending or Create a Debt Paydown Plan. And bring your questions, our teachers are happy to help!