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Level 1

Credit Card Payment With Interest

Hello,

 

How should Credit Card transfers from checking, that include principle and interest be handled?

 

Note:

Payment to credit card from checking contain both a PRINCIPLE and INTEREST payment. I do not understand how you can split this payment to pay down the CC and add to an interest expense account.

Solved
Best answer March 26, 2020

Best Answers
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Moderator

Credit Card Payment With Interest

I've got the additional steps to split a credit card payment with principal and interest in QuickBooks Online (QBO), @Charles-Shumway.

 

Based on your scenario, it looks like you haven't set up two accounts for the principal and interest. That's why it increases your CC balance. Let's first set them up from the Chart of Accounts menu. This way, you'll be able to label the principal and interest in the expense you've entered above. For the detailed instructions, see the Set up the accounts for your line of credit section through this article: Track A Line of Credit (LOC)

 

Once done, let's open the expense to add the principal and interest in the transaction. I'll guide you how. 

  1. Go to the Category details section.
  2. Add a second line item for Principal and enter its amount. 
  3. For Interest, add a third line item and enter the amount. 
  4. Click Save

 

The screenshot below shows you the steps. For more information, view the Pay with a debit or credit card section through this article: Record A Payment To Your LOC

AddPrincipalAndInterestInExpense.PNG

 

Yes, managing a line of credit has the same process with tracking credit card. It's because they are accounted for as current liabilities in the program. 

 

Since you're using bank feeds, you'll have to match the $150 transfer to the expense you've created. It helps you ensure there are no duplicate entries in the software. 

 

After that, you can continue reconciling your account to ensure it matches your bank statement. It also keeps your books accurate. To learn more about this process, visit this article: How To Reconcile An Account

 

I'm just a comment away if you need further assistance. Enjoy the rest of your day, @Charles-Shumway

View solution in original post

6 Comments
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Moderator

Credit Card Payment With Interest

Hey there, @Charles-Shumway.

 

Thanks for reaching out to us. Hope all is well. Recording your credit card payments in QuickBooks Online is super easy and only takes a few moments. Take a look:

 

First, you can enter it as an Expense transaction but not under the Item details. Instead, you'll post it to your Interest Expense account. 

 

  1. Go to the Plus icon.
  2. Under Vendors, select Expense.
  3. Choose a Payee, a Payment date, and a Payment method.
  4. From the Payment account drop-down menu, select the bank account you're reconciling.
  5. Under the CATEGORY column from the Category details, choose your Interest Expense account.
  6. Enter the amount of the interest charge.
  7. Click Save and close.

 

That's it! Once completed, you can continue reconciling your account.

 

Let me know if you have any other questions. I want to ensure we get you back up and running in no time. Have a great day!

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Level 1

Credit Card Payment With Interest

Michael K,

 

Thank you for the detailed write up. I understand the process and how it should work much better; However, I must have my account setup incorrect because after following these steps the result in an increase to my CC balance. Just to clarify, my goal is to pay down my credit card (LOC).

 

Questions

 

1. Currently I am using the bank feeds to manage a line of credit account. From what I understand managing    

a line of credit and credit card is the same process and can be done because both are accounted for as current liabilities in QBO, CORRECT?

 

2. Because I use bank feeds, when a payment is recognized it auto populates in the account as for example $150 transfer from checking. This transfer should include both principle and interest, how do I label the principle and interest in that $150 transfer?

 

If I need to clarify my goal more, let me know. 

 

 

Highlighted
Moderator

Credit Card Payment With Interest

I've got the additional steps to split a credit card payment with principal and interest in QuickBooks Online (QBO), @Charles-Shumway.

 

Based on your scenario, it looks like you haven't set up two accounts for the principal and interest. That's why it increases your CC balance. Let's first set them up from the Chart of Accounts menu. This way, you'll be able to label the principal and interest in the expense you've entered above. For the detailed instructions, see the Set up the accounts for your line of credit section through this article: Track A Line of Credit (LOC)

 

Once done, let's open the expense to add the principal and interest in the transaction. I'll guide you how. 

  1. Go to the Category details section.
  2. Add a second line item for Principal and enter its amount. 
  3. For Interest, add a third line item and enter the amount. 
  4. Click Save

 

The screenshot below shows you the steps. For more information, view the Pay with a debit or credit card section through this article: Record A Payment To Your LOC

AddPrincipalAndInterestInExpense.PNG

 

Yes, managing a line of credit has the same process with tracking credit card. It's because they are accounted for as current liabilities in the program. 

 

Since you're using bank feeds, you'll have to match the $150 transfer to the expense you've created. It helps you ensure there are no duplicate entries in the software. 

 

After that, you can continue reconciling your account to ensure it matches your bank statement. It also keeps your books accurate. To learn more about this process, visit this article: How To Reconcile An Account

 

I'm just a comment away if you need further assistance. Enjoy the rest of your day, @Charles-Shumway

View solution in original post

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Level 1

Credit Card Payment With Interest

I am having the same problem but this is not working for me,  my transactions come in automatically. The credit card, which I entered all the transaction on it and it also shows the payment. The checking account shows the payment but it includes interest charges.  If I split the payment to post interest to expense and CC payment as transfer to CC, it doesnt show as a matched transfer, neither does the credit card, so it messes with the balances, looks like it posts twice. does that make sense? can anyone advise how to post this. Thanks

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QuickBooks Team

Credit Card Payment With Interest

Hello there, beckyjbiter. 

 

If the transaction was automatically added to your register, it can cause duplicates if there are transactions manually recorded within QuickBooks. We can undo the added transaction and exclude it. 

 

Here's how to undo:

  1. From the Transactions menu, click Banking.
  2. Select the bank and click the Categorized or Reviewed tab. 
  3. Look for the automatically added transaction, and click Undo

When you undo a transaction, it removes it from the bank's register, and the transaction is now moved back to the For Review tab. From there you can exclude it. 

 

Keep me posted if you have other questions. Stay safe and have a great day!

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Level 1

Credit Card Payment With Interest

We have an account for two credit cards in notes payable because we only used them to start up the company 5 years ago. We also created an expense account for each card. We have paid them in full, same with a note payable  for a vehicle. However the note payable has a balance and so does the expense account. What needs to be done to close these accounts out. How would the journal entry look?

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