Cash Back Rewards

Fri Mar 17 01:30:23 EDT 2017

I’m a novice too, but this is my take on things. I always appreciate correction from those more knowledgeable.

It certainly makes sense to put the entire rebate credit into a single expense account, instead of wasting hours of time attaching portions of the rebate to the expenses on which they were earned (e.g., 2% of that fuel purchase, 1% of that twinkie in the gas station variety store, or was that 0.5% on the first $3000 worth of twinkies etc., or 1% before $3000 then 0.5% after $3000? I can’t remember) which is what John said previously in this thread.

Where it goes in the Expense tree is up to you, and your accountant if you have one, if s/he has an opinion on the matter. Putting it in a contra account beside the interest sounds like a good choice to me. However, if one is in the ideal position of paying no credit card interest, then there would be no interest to compare the rebates against. Personally I put the rebate credits in a single Expenses:Rebates:Credit Card account similar to what John does, but it might be interesting to break it down by credit card. Another scenario: if you only use your credit card for fuel, say, then it might make more sense to associate the rebate more closely with fuel. There is flexibility in your choice of account because there’s no external account to reconcile against.

(Some cards have the additional complication of tracking “points”. You can keep track of the points by setting up a commodity for that purpose, but for me that’s going too far. I just account for the rebate when it turns into something useful for me. Others do keep track of their points, however.)

The debit side is more straightforward: it should go wherever the rebate actually shows up. For example, one of my credit cards can dump points redemption right into the CC account, so that’s where the debit goes in my accounting. (I also have the option of buying blenders and coffee makers and other garbage, which is kind of mind-bending from an accounting perspective: the debit would go straight back to expense, kind of like a virtual particle in particle physics. Money appears and disappears immediately and I now have a blender, like Hawking radiation from a black hole. I have succumbed to the temptation of ordering such crud on occasion, but then I don’t even bother accounting for it, because the transaction basically nets to zero immediately.) 

On the other hand, I get store credit with my Costco card, so when I use the rebate to partially pay for a mixed assortment of junk I buy there I get a magnificent multi-split transaction that rivals my pay cheque in complexity, e.g.,

Expenses:Rebate:CC Cr. $100
Liabilities:Credit Cards:MasterCard Cr. $27.50
Expenses:Groceries Dr. $47.50
Expenses:Art:BlackVelvetPaintings Dr. $30
Expenses:Clothes Dr. $25
Expenses:Entertainment:MovieVouchers Dr. $25

In this example, there isn’t really an “other side” to the rebate credit; there is no debit of $100.

E

Sent from Mail for Windows 10

From: Leo Bolta
Sent: March 16, 2017 7:30 PM
To: 'Les'; 'Edward Doolittle'; 'John Ralls'
Cc: 'GNU Cash User'
Subject: RE: Cash Back Rewards

This from a novice:  Could one handle a CC rebate by crediting the interest
charge account associated with that particular card?  With rebates
offsetting credit card charges, one could easily track the 'profitability
vs. expense' of holding that individual card?  If this makes sense, how
would one handle the debit side of the transaction?

-----Original Message-----
From: gnucash-user
[mailto:gnucash-user-bounces+lbolta=rogers.com at gnucash.org] On Behalf Of Les
Sent: March-16-17 2:03 PM
To: Edward Doolittle; John Ralls
Cc: GNU Cash User
Subject: Re: Cash Back Rewards

Thanks for the feedback.  The debit to the liability was straightforward, it
was the credit that stumped me.  I never thought of adding the expense such
as rebates. 

Les

On 03/16/2017 12:41 PM, Edward Doolittle wrote:
> Uh, a rebate is a debit to liability and a credit to expense, no?
>
> Whether associated values are positive or negative depends on the 
> "Reversed Balanced accounts" setting. When set to "Credit accounts"
> (the usual choice), a rebate will decrease liability balance and 
> decrease expenses.
>
> Edward
>
> _____________________________
> From: John Ralls <jralls at ceridwen.us <mailto:jralls at ceridwen.us>>
> Sent: Thursday, March 16, 2017 10:52 AM
> Subject: Re: Cash Back Rewards
> To: Les <lelliott5 at gmail.com <mailto:lelliott5 at gmail.com>>
> Cc: GNU Cash User <gnucash-user at gnucash.org 
> <mailto:gnucash-user at gnucash.org>>
>
>
>
> > On Mar 16, 2017, at 9:22 AM, Les <lelliott5 at gmail.com
> <mailto:lelliott5 at gmail.com>> wrote:
> >
> > I have a credit card that pays a cash back after accumulating at 
> > least $50 @ 3% for each purchase. How do I handle this credit 
> > against a current balance?
>
> I have a similar "rewards" card. I book the rebates as a credit (i.e.
> a negative value) to the CC liability account and a debit to an 
> "Expenses::CC Rebates" account because I'm too lazy to figure out how 
> much of the rebate to allocate to each of the "real" expense accounts 
> that it should apply to.
>
> Regards,
> John Ralls
>
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