How to handle principle and interest payments

Question

Just started using Quicken Classic for Business & Personal. When a payment is downloaded how do you split the transaction into principle and interest to reflect the correct balance. For example the balance is $1,000, I pay $100 ($70 principle/$30 interest). Currently Quicken shows a balance of $900 (1,000-100), however the correct balance is $930 (1,000-70). I know you can split the payment and I have and used INT Exp it but the $30 is still reducing the balance.

Sorry if this has been addressed. I've looked and either not using correct tags or not recognizing the correct topic.

Tom Young · Answer

Now I'm lost.

You say "The payment is reconciling between my bank and the payment (100 paid=100 received)."  I read that this way: "the full payment from checking to (credit card or LOC) is being applied to principal."  Is that reading correct, is that what you're telling us and, most importantly is that reflective of the real world we live in?  That is, does the credit card company or LOC lender handle that payment in that same fashion?

It seems like there's 3 logical answers to that question:

* "Yes it does."  In which case we have no problem
* "No, the (credit card company LOC lender) only shows a portion of this payment as applied to principal.  The rest is interest."  In which case see the above recommendations about splitting that payment in the bank Account between the two.
* "Yes it does, BUT it has also charged me interest that's shown as being as part of the amount due (principal) and I don't know how to capture that interest in Quicken."  In which case you must take that interest charge transaction and code it, in the (cc or LOC) Account as interest expense.

So what's the real world situation you're facing here or is there another possible answer that I've omitted?  Your statement "So are saying I need to split the payment from the bank and not how it was applied on the loan?" suggests #3 is correct, but of course I'm not sure.

Glass half full · Answer

I appreciate the help. I'm referring to my credit card (and LOC) accounts when they update in Quicken. The payment is reconciling between my bank and the payment (100 paid=100 received). So are saying I need to split the payment from the bank and not how it was applied on the loan? I apologize for sounding so dense on this. I did verify my CC account is set up as a 'Credit' (so assuming it's default for 'credit card'). I'm surprised I'm not seeing any Youtube videos to help with this. Or, again, am I not using the correct tags? Any direction on this would also be helpful if anyone has found them. I really appreciate the help and time.

Tom Young · Answer

"When a payment is downloaded how do you split the transaction into principle and interest to reflect the correct balance."

Since you're referring to a downloaded payment and the split of that payment into principal and interest, I assume you're referring to a download into your Quicken checking Account.

"Currently Quicken shows a balance of $900 (1,000-100)"

You don't say where you're seeing this but presumably this is how Quicken is indicating the split of the payment in your Quicken checking Account, maybe because the last recorded (and memorized) payment was in this amount?  Something like this?:

You simply change that $900 to $930 and the interest number from $100 to $70.  That preserves the total payment of $1,000 and sends the correct amount of principal to the loan Account.

You should use the Quicken loan "wizard" to set up the loan and it will calculate the proper amortization schedule for the loan and create a Reminder that can enter that properly split payment into the checking Account for you.