What You Need to Know about QuickBooks Online and Credit Card Transactions - dummies

What You Need to Know about QuickBooks Online and Credit Card Transactions

By Elaine Marmel

By default, QuickBooks Online treats Credit Card account transactions as cash transactions, a conservative approach that recognizes expenses as they occur. To account for credit card transactions, set up both your credit card company as a vendor and a Credit Card account for the credit card in your Chart of Accounts, and use Expense transactions to record credit card purchases to the account as you make each purchase. If you need to record a credit card return, use the Credit Card Credit transaction.

When the credit card bill arrives, you can pay it in a number of ways:

  • To pay by check, use the Check transaction, select your credit card company as the vendor, and, in the Account Details section, select your credit card account.
  • To pay by transfer (where you transfer money electronically or manually from a bank account to your credit card account, which reduces both accounts), use the Transfer transaction, selecting the bank account you’ll use to pay the bill as the Transfer Funds From account and the credit card company/vendor you’re paying as the Transfer Funds To account.
  • To pay the bill while reconciling the credit card account, follow the necessary steps to reconcile the account. When you click Finish, you’ll be given the option to write a check to pay the amount due, enter a bill to pay the bill later, or do nothing about paying the bill now (and later, on your own, enter a check or a bill for the amount due).

If you want to recognize credit card expenses when you pay your credit card bill (rather than when you make a purchase using your credit card), do set up a vendor for your credit card company, but don’t set up a Credit Card account in the Chart of Accounts, and don’t enter Expense transactions or Credit Card Credit transactions in QBO for credit card transactions as they occur.

Instead, when you receive your credit card statement, enter a Bill transaction and allocate each line on the credit card statement to the appropriate account or item; record credit card refunds as negative lines on the Bill transaction. QBO then treats your credit card account as an Accounts Payable vendor. And when you’re ready to pay the credit card bill, you can write a check, transfer funds, or use the Pay Bills page to pay the credit card statement.

This is the less conservative approach to tracking credit card expenses; if you are a heavy user of your credit card, do yourself a favor and use the first approach so that you can effectively manage your credit card spending.