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

# How Debt Accounts Work

> Understand how liability accounts track what you owe, why debt math seems backwards, and how different debt types work in Sure.

# How Debt Accounts Work

Debt accounts (also called liability accounts) track money you owe to others. This includes credit cards, loans, and any other obligations.

## Why Debt Math Seems "Backwards"

If you're used to thinking about asset accounts, debt accounts can feel counterintuitive at first. Here's the key difference:

| Balance Type         | What It Means                                   |
| -------------------- | ----------------------------------------------- |
| **Positive balance** | You owe money                                   |
| **Negative balance** | The lender owes you money (overpayment, refund) |

And transactions work in the opposite direction from assets:

| Action        | Asset Account     | Debt Account                  |
| ------------- | ----------------- | ----------------------------- |
| Spend money   | Balance decreases | Balance increases (more debt) |
| Receive money | Balance increases | Balance decreases (less debt) |

> \[!TIP]
> Think of a debt balance as "Amount Owed" rather than "money I have." A higher number means you owe more, not that you have more.

## Credit Card Example

Let's walk through a typical credit card scenario:

| Action                | Balance Change | New Balance | What It Means     |
| --------------------- | -------------- | ----------- | ----------------- |
| Starting balance      | —              | \$500       | You owe \$500     |
| Buy groceries (+\$80) | +\$80          | \$580       | You now owe \$580 |
| Gas purchase (+\$45)  | +\$45          | \$625       | You now owe \$625 |
| Make payment (-\$300) | -\$300         | \$325       | You now owe \$325 |

Notice how spending **increases** the balance (you owe more) and payments **decrease** it (you owe less).

### Overpayment Scenario

What happens if you pay more than you owe?

| Action                | Balance Change | New Balance | What It Means              |
| --------------------- | -------------- | ----------- | -------------------------- |
| Starting balance      | —              | \$100       | You owe \$100              |
| Make payment (-\$150) | -\$150         | -\$50       | Card company owes you \$50 |
| Buy coffee (+\$5)     | +\$5           | -\$45       | Card company owes you \$45 |

A negative balance on a credit card means you've overpaid—the credit card company owes *you* money. This might happen from:

* Overpayment
* Refunds for returned purchases
* Statement credits or rewards

## Types of Debt Accounts

Sure supports three types of liability accounts:

### Credit Card

Track your credit card balances and spending. Credit card accounts can include:

| Field            | Description                            |
| ---------------- | -------------------------------------- |
| APR              | Annual percentage rate (interest rate) |
| Available Credit | Remaining credit you can use           |
| Minimum Payment  | Minimum amount due                     |
| Annual Fee       | Yearly card fee                        |

### Loan

Track mortgages, auto loans, student loans, and other installment debt.

| Subtype  | Description          |
| -------- | -------------------- |
| Mortgage | Home loan            |
| Student  | Student loan debt    |
| Auto     | Car loan             |
| Other    | Personal loans, etc. |

Loan accounts support additional fields:

| Field           | Description                      |
| --------------- | -------------------------------- |
| Interest Rate   | Annual interest rate             |
| Rate Type       | Fixed or variable rate           |
| Term            | Loan duration (months)           |
| Monthly Payment | Calculated based on loan details |

> \[!NOTE]
> For fixed-rate loans, Sure can calculate your monthly payment automatically based on the original balance, interest rate, and term.

### Other Liability

For debts that don't fit the above categories:

* Personal loans from friends/family
* Medical bills
* IOUs
* Tax obligations

## How Debt Affects Net Worth

Liabilities **reduce** your net worth:

```
Net Worth = Total Assets - Total Liabilities
```

When you pay down debt, your net worth increases (even though your cash decreases). This is because the debt reduction outweighs the cash spent—you're converting a liquid asset (cash) into reduced liability (less debt).

### Example: Paying Off a Credit Card

| Account                 | Before Payment | After \$500 Payment |
| ----------------------- | -------------- | ------------------- |
| Checking (Asset)        | \$2,000        | \$1,500             |
| Credit Card (Liability) | \$500          | \$0                 |
| **Net Worth**           | **\$1,500**    | **\$1,500**         |

Your net worth stays the same because you traded $500 of cash for $500 of debt reduction. But now you have no credit card debt!

## Adding Debt Accounts

To add a debt account:

1. Click **+ Add Account** on your dashboard
2. Select the liability type (Credit Card, Loan, or Other Liability)
3. Enter your account details:
   * Account name
   * Current balance (the amount you owe)
   * For loans: interest rate, term, and rate type
4. Click **Create Account**

> \[!IMPORTANT]
> Make sure to select a liability account type (Credit Card, Loan, or Other Liability) when adding debt. If you accidentally create a Cash account for your credit card, the balance calculations will be incorrect.

## Understanding Loan Payments

When you make a loan payment, the payment typically covers:

1. **Interest** - Cost of borrowing
2. **Principal** - Reducing the amount you owe

Sure tracks your loan balance, which represents the remaining principal. As you make payments, the balance decreases until the loan is paid off.

> \[!TIP]
> To track loan payments accurately, create a [transfer](./transfers.mdx) from your checking account to your loan account. This properly reflects the payment in both accounts.