Track Debit, ATM, and Customer Credit Cards in QuickBooks 2019

By Rosemarie Withee, Ken Withee, Jennifer Reed

Debit and ATM cards, when you get right down to it, aren’t credit cards at all. Using a debit card or an ATM card is more akin to writing a check than anything else. Rather than withdrawing money by writing a check, however, you withdraw money by using a debit card.

Although a debit card transaction sometimes looks (at least to your friends and the merchants you shop with) like a credit card transaction, you should treat a debit card transaction like you treat a check. In a nutshell, here’s what you need to do:

  • When you charge something to a debit card, record the transaction just like you record a regular check. You may want to enter the transaction number as the check number or in the Memo line so that you can keep track of the transaction.
  • When you withdraw cash by using a debit card, record the transaction as a regular withdrawal (or transfer to a petty-cash account), as though you went to the bank with a withdrawal slip.
  • When you make a deposit through a cash machine by using a debit card, record the transaction just like you record a regular deposit.

What about Customer Credit Cards?

If you don’t already know this, although your customers probably love to pay you with credit cards, customer credit cards create a headache for you. The reason is that your merchant bank or credit card processor aggregates customer credit card charges and then — maybe on a daily basis or maybe every few days — deposits a big wad of cash in your bank account. The cash represents the sum of the recent credit card charges minus a fee.

This all sounds innocuous enough, but here’s an example of how it works. Customers A, B, and C come in on Monday and spend $5, $10, and $15, respectively. Then, on Tuesday, customers D, E, and F come in and spend $10, $50, and $30, respectively. On Wednesday, you don’t sell anything to someone who uses a credit card, but you do see a $105 deposit in your bank account by the credit card company.

The problem is that you’re looking at the last two days’ worth of credit card transactions, and you know that they total $120 because that’s the total you sold to customers A, B, C, D, E, and F. So what’s with the $105? Is the missing $15 a service fee? Oh, no, wait. Maybe Customer A called his credit card company and blocked that first $5 charge. Or maybe it was Customer B?

If you accept a credit card, you know how this works, right? It’s a royal headache.

I think you probably have two reasonable approaches for dealing with this madness:

  • The Good Accountant’s Way: You can record customer credit card payments in the usual way — the way that QuickBooks expects. The Good Accountant’s Way produces nice, accurate records, but at the cost of enormous bookkeeping hassles. Interested in more information? Great! Use the QuickBooks Help command to search QuickBooks online help for the topic recording a credit card payment.
  • The Bad Accountant’s Way: You can just record sales receipt transactions when the credit card company deposits net charges amounts in your bank account. In other words, using the example numbers given in an earlier paragraph, rather than recording individual transactions for customers A, B, C, D, E, and F when the sales occur, you can record a $105 transaction when the credit card company deposits $105 into your bank account. If you know the credit card company’s service charge, you can record that, too, using a journal entry. (You’ll probably want to ask your accountant for help on this.)

I should tell you something else. The Bad Accountant’s Way probably isn’t justified unless you’re in a high-volume situation — such as a retail store — and when you’re using a periodic inventory system or when you don’t sell inventory. If you have only a handful of credit card transactions — say, one every few days — or if you’re trying to use a perpetual inventory system, you should use the Good Accountant’s Way.