> ## Documentation Index
> Fetch the complete documentation index at: https://docs.budgetbandit.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Set up a credit card

> Add a credit-card account and understand its Payment category — the part of your budget that tracks what is safe to pay.

A credit card in Budget Bandit is an account with a balance you owe rather than money you
have. Adding one creates two things: the account itself, and a **Payment** category in
your budget that tracks how much of the balance you have the cash to pay.

## Add a credit-card account

<Steps>
  <Step title="Open Accounts and add an account">
    Choose to add a new account and select the **Credit Card** type.
  </Step>

  <Step title="Name the card and enter its current balance">
    Enter what you owe today as the starting balance. A card you owe money on starts with
    a negative balance — that is the debt.
  </Step>

  <Step title="Add optional card details">
    You can enter the credit limit, payment due day, minimum payment, and APR. These power
    the due-date reminders, utilization meter, and the payoff report later, but none are
    required to start.
  </Step>

  <Step title="Save">
    The account appears in your sidebar, and a Payment category for this card appears in
    your budget.
  </Step>
</Steps>

<Note>
  If you enter a starting balance you already owe, Budget Bandit asks how you plan to
  handle it: pay it in full, or pay it down over time. Paying over time sets up a monthly
  payoff plan on the card. See [Debt payoff](/credit-cards/debt-payoff).
</Note>

## How the Payment category works

This is the heart of how Budget Bandit handles credit cards. When you spend on the card
out of a category you funded, that money moves to the card's Payment category and becomes
**safe to pay**.

Here is the flow:

1. You assign \$100 to Groceries.
2. You buy \$40 of groceries on the credit card.
3. Groceries Available drops to $60, and the card's Payment category gains $40.

That \$40 in the Payment category is cash you have set aside and can hand to the card
issuer without touching anything else in your budget. You spent the money in the category
that earned it; the Payment category just reserves it for the bill.

<Note>
  This is the funded-portion model. Only spending you actually budgeted for moves to the
  Payment category. If you spend on the card without budgeting first, that part does not
  become safe to pay — the Payment category shows short. See
  [The Payment category is red](/credit-cards/payment-category-is-red).
</Note>

## Starting balances are not auto-funded

The balance you owed the day you added the card is not automatically marked safe to pay —
you have not budgeted for it yet. It shows up as an underfunded amount on the Payment
category from day one. Budget toward it over time, or set up a payoff plan, to clear it.

## Related

<CardGroup cols={2}>
  <Card title="How credit cards work" icon="circle-info" href="/concepts/how-credit-cards-work">
    The full concept behind the Payment category.
  </Card>

  <Card title="Pay your card" icon="money-bill-transfer" href="/credit-cards/pay-your-card">
    Record a payment as a transfer.
  </Card>

  <Card title="Payment category is red" icon="circle-exclamation" href="/credit-cards/payment-category-is-red">
    Why it goes short and how to fix it.
  </Card>

  <Card title="Debt payoff" icon="hand-holding-dollar" href="/credit-cards/debt-payoff">
    Pay down a balance you carried in.
  </Card>
</CardGroup>