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Anonymous
Not applicable

Categorizing Credit Card Payments

I have 2 credit cards. 1 for exclusively for Work, and 1 that is for mostly work but sometimes has larger personal things on it too. 

I pay off the Work card in installments each month, I am no longer using it to purchase anything, just paying off the balance.

The Mostly Work card I pay off in full each month. 

My question is: How should I be categorizing these payments in the Banking Section of my Quickbooks Online? 

Solved
Best answer November 14, 2017

Best Answers
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Level 15

Categorizing Credit Card Payments

Credit Card balances are Debt. The Balance you owe gets increased by entering Expense charges that you used that card for, already. The credit card purchases are individually entered, for the date you used that card to buy something. That is how your balance owed Increases.

 

The balance goes down by the payments you make. A payment against a Card Balance is paying against that credit card type of liability account in your file, the same as ane debt payment is not expense but Liability payment.

 

In other words, paying VISA or AMEX is a debt payment, it isn't the purchase of something. You didn't buy anything from them. They are Lender = the card provider for micro-loans.

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13 Comments 13
Highlighted
Level 15

Categorizing Credit Card Payments

Credit Card balances are Debt. The Balance you owe gets increased by entering Expense charges that you used that card for, already. The credit card purchases are individually entered, for the date you used that card to buy something. That is how your balance owed Increases.

 

The balance goes down by the payments you make. A payment against a Card Balance is paying against that credit card type of liability account in your file, the same as ane debt payment is not expense but Liability payment.

 

In other words, paying VISA or AMEX is a debt payment, it isn't the purchase of something. You didn't buy anything from them. They are Lender = the card provider for micro-loans.

View solution in original post

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Anonymous
Not applicable

Categorizing Credit Card Payments

That is a great, in depth, and helpful reply, thank you! 

So in Quickbooks Online, should I just link my credit card through Banking and enter each expense? Or should I just enter the total payment to the credit card as a debt payment? Or do I do both? 

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Level 15

Categorizing Credit Card Payments

"should I just link my credit card through Banking and enter each expense?"

 

Linked or not, the entry of an expense paid by Credit Card is similar to one paid from Checking (as paper or debit card); the difference is the Source of Funds. You didn't use your own money; you Charged it on that card.

 

"Or should I just enter the total payment to the credit card as a debt payment?"

 

The Payment is a Transfer, between checking and the credit card account. That way, they Both Go Down.

 

"Or do I do both?"

 

The first is the spending of someone else's funds by using their credit card they provided to you.

 

The second is your Cash Flow as an expediture but not as an expense account entry.

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Anonymous
Not applicable

Categorizing Credit Card Payments

Wow, that was an awesome answer! Everything finally makes sense! Thank you :-) 

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Level 1

Categorizing Credit Card Payments

I'm still lost. So I have my bank account. I also have my credit card. Quick books pulls my Credit card balance from the website and I imports the "transactions". However, when I add these Transactions and start coding to them to the correct account on the Banking screen for review, they make the "QUICKBOOKS" total go up. So therefore the actual credit  card balance, and the quick-book balance doesn't match. How do I keep these transactions added to the correct accounts like "Cost of Goods" sold, without making the balance go up? 

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QuickBooks Team

Categorizing Credit Card Payments

Hello there, @jlmealprep.


I’m here to help categorize the transactions and make sure that QuickBooks balance matches with what’s on the credit card website.


Before we begin, may I ask if the credit card is connected to QuickBooks? If so, importing the same transactions you've already downloaded causes the balance in the account to go up.


Choose which method suits your business best. Either you download the transactions directly within QBO and edit the category to COGS or import and add them to the register with the correct account. Performing both processes at the same time can cause duplicates and incorrect balances.


You can also match the downloaded or existing to the imported transactions to maintain the correct credit card balance. I recommend checking out the following articles for more information: 

That should answer your concern for today.

 

Post again in the Community if you have any follow-up questions, I’m always here to help. Have a good one!

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Level 1

Categorizing Credit Card Payments

When a purchase transaction is posted in the credit card account, the credir card negative balance is increasing, which is fine. Now, when a payment is made to the credit card,I'm creating a "transfer" from my checking account to the credit account. Cash decreases in the checking account, which is correct, but the "transfer" is actually increasing the negative balane in the credit card account too, which doesn't seem right. The negative balance should decrease. As a result, the negative balance has become very high.  What am I doing wrong? How should I fix my books?

 

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QuickBooks Team

Categorizing Credit Card Payments

Hi pngsvc,

 

The positive amount in the credit card account is a liability, while the negative amount is an over payment.

 

To fix this, you can transfer the amount back into your checking account. Using the credit card account to pay the expense transaction can be an option, too.

 

You might want to check out this helpful article for your reference: Transfer funds between accounts.

 

Let me know if there's anything else you need. We're always here to help.

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Level 1

Categorizing Credit Card Payments

When I click the transfer, my credit card balance increases.  What have I done wrong?

Highlighted
QuickBooks Team

Categorizing Credit Card Payments

Hi @qkbks_newbie,

 

This happens when you choose your credit card account as the source of the payment, and your bank as the recipient. It should be the other way around. 

 

You'll want to delete the previous transfer transaction you created to keep your books accurate.


Here's how:

  1. Highlight the Accounting tab.
  2. Select Chart of Accounts.
  3. Search for your credit card account, and click on it. 
  4. On your credit card register page, locate the specific transfer you created earlier, and click it.
  5. Tap the Delete button.

You can create a new transfer transaction at this point. Ensure that the Transfer Funds From drop-down menu has the bank account where the payment is coming from. The Transfer Funds To drop-down menu should be set to your credit card account. Refer to the screenshot below as an example of recording a credit card payment.

 

 

Other than creating a transfer transaction, you have other options on recording a credit card payment. Check out this article for additional details: Record credit card payments.

 

I'll be around in case you need further help. Leave a comment below, and I'll get back to you. 

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Level 1

Categorizing Credit Card Payments

Hi Ryan,

 

How do I set it up the other way around...making my bank account the payment source?

 

I received this message when I was about to delete "This transaction was downloaded from your bank’s records. If you delete it now and change your mind later, you can add it back through the Online Banking page. Are you sure you want to delete it?"

 

 

Highlighted
Moderator

Categorizing Credit Card Payments

Hello qkbks_newbie,

 

Based on the error message you mentioned, the transfer transaction comes from the Online Banking. We can select Yes to delete the transfer transaction.

 

Aside from that, we can go to the Banking page and Undo it, too. Here's how to undo a matched, added, or transferred banking transaction:

  1. Select Banking on the left menu and go to the Banking tab.
  2. In the Banking page, highlight the connected credit card account.
  3. Go to the Reviewed section and click Undo on the transfer transaction.

This process will remove the transfer transaction from your register. You might want to exclude the banking transaction to avoid duplicates in your register.

 

After that we can create a transfer transaction manually. This was also suggested by Ryan_M.

  1. Click the + New button on the left menu and select Transfer.
  2. Select the bank account in the Transfer Funds From field.
  3. Select the credit card account in the Transfer Funds To field.
  4. Enter the Transfer Amount and the Date.
  5. Click Save and close.

This will serve as a payment for the credit card account. We can also create a check to record a credit card payment: Record credit card payments.

 

Screenshots were already provided by Ryan_M and can also be viewed through the related associated articles.

 

We'll get back to you if you require more assistance in navigating QuickBooks Online. Have a great day!

Highlighted
Level 1

Categorizing Credit Card Payments

Hello,

 

I’m still a little confused on how to categorize credit card debits/credits that are posted to both credit card and bank accounts.

 

I have 3 scenarios that I need clarifications on if possible:

 

  1. My previous accountant categorized my credit card payment transfers titled “owner’s pay & personal expenses”. I pay some of my credit cards with personal banking funds that are not linked with QuickBooks due to the fact that I utilize unspent profits back into the business. Is this categorized correctly?
  2. What do I categorize the credit from the business card I have dedicated for my business which is paid each month from the bank account that is linked to QuickBooks? Do I categorize this credit/transfer and title as “owner’s pay & personal expenses” or should I title the category as a transfer from my linked bank account?
  3. What do I categorize the debit from the bank account linked to QuickBooks which pays for the business credit card on file?

 

Thank you so much for you tim

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