Cash Back Rewards

Fri Mar 17 13:00:46 EDT 2017

Generally, I don't allow CC debt to creep up and am quite diligent to pay
off the total bill each month but on rare occasions there can be an
oversight and I'll get dinged with an interest charge.  I only have a single
CC and it happens to be issued under the brand of a grocery store chain, so
accumulated points are redeemed almost exclusively for plain old practical
groceries at the point of purchase.  

In my world then (as you suggest in your explanation), I could get away with
simply debiting my Grocery Expense account for these redemptions.  Expensing
it into a single account also keeps better track of the true accumulating
dollars expensed in that category, whether I paid hard earned cash for it or
not.  As you also point out, charging a single account (if appropriate),
would be much less complex than allocating a single purchase into a multiple
split transaction.  

Since I only have one CC to my name, crediting that cards interest charges
account with redemptions purchases would yield a negative interest charge
value by years end, since I generally fully pay my bills on time.  I'm not
sure of (and maybe don't even care) about standard accounting practices but
as long as I understand and can interpret a negative number representing my
year end 'interest charge' result.  So, unless there is a correction from
someone more knowledgable, I'll likely carry out this make-shift method...  

  _____  

From: edward.doolittle at gmail.com [mailto:edward.doolittle at gmail.com] 
Sent: March-17-17 1:30 AM
To: Leo Bolta; 'Les'; 'John Ralls'
Cc: 'GNU Cash User'
Subject: RE: Cash Back Rewards

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

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From: Leo  <mailto:lbolta at rogers.com> Bolta
Sent: March 16, 2017 7:30 PM
To: 'Les' <mailto:lelliott5 at gmail.com> ; 'Edward Doolittle'
<mailto:edward.doolittle at gmail.com> ; 'John Ralls'
<mailto:jralls at ceridwen.us> 
Cc: 'GNU Cash User' <mailto:gnucash-user at gnucash.org> 
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 gmailcom

> <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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