How to categorise bank transactions

By The Income Tracker · Updated 8 September 2026 · 5 min read

Start with ten, not thirty

The urge is to be precise: coffee separate from lunch, petrol separate from parking. Precision is what kills budgets. By week three there are forty categories and a growing pile of unsorted rows. Ten coarse buckets show you where the money goes and take seconds to maintain. You can always split one later when a specific question comes up.

Four rules that settle every argument

• Transfers are not spending. Money moved to your own savings, your credit card or a joint account is a transfer, not an expense. The tracker skips them so they never double-count.
• Refunds go back to the category they came from, not into income.
• A supermarket trip is Groceries even if it included a birthday card. Do not split rows unless the non-grocery part is big.
• When you cannot decide in three seconds, pick the coarser category and move on. Consistency beats accuracy.

Make it automatic

The first month is the only one that takes effort. Categorise a merchant once and The Income Tracker remembers it: the next Tesco row, the next TfL row, the next Netflix row land in the right place on import. Unknown merchants get a suggestion from built-in rules (payroll wording is income, a known card issuer is a debt payment), and anything low-confidence is queued for you to confirm. Most people are down to a handful of decisions per month by the second import.

Needs, wants, savings

The needs and wants column above is the one that makes the categories useful. Add up the needs and compare them with your take-home pay. If needs are eating more than half, no amount of cutting takeaways will fix the month. That is a housing or bills problem, and it is better to know.

Frequently asked questions

How many budget categories should I have?

Around ten. Enough to see the shape of your spending, few enough to keep up with. Split a category only when a specific question needs it.

Should transfers to savings count as spending?

No. They are money moving between your own accounts. Track them as savings, and keep them out of your expenses total.

How do I categorise a refund?

Put it back in the category the original purchase came from. It reduces that category's total rather than adding to income.

Can categorisation be automatic?

Yes. The Income Tracker remembers how you categorised each merchant and applies it on the next import. Built-in rules cover common cases like salary and card payments.

Related

---