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Senior Explorer ***

How to apply credit card refund to credit memo in QBO?

I read many answers on this subject here but I can't seem to find or filter my search for QB Online versions is my problem: 


A customer paid an invoice in full $5000 by credit card (we don't use QB credit card feature, we have a 3rd party merchant).  A few days later, customer returned product for full refund LESS shipping, I created a credit memo $4900 ($5000 product less $100 shipping).  Customer was refunded $4900 back to her credit card.  How do I process the credit card refund in QBO? The customer accounts is now: 


Invoice $5000

Payment ($5000)

Credit Memo ($4900)


The customer has an open credit memo of $4900. A step by step instructions will be very much appreciated. 


Thank you! 


QuickBooks Team

Re: How to apply credit card refund to credit memo in QBO?

Good day, @FabianaT,


I'd be glad to provide you with the steps on how to process a credit card refund in QuickBooks Online.


You can create an expense under Accounts Receivable category to record the refund. By doing so, the credit memo will be linked with the expense to zero out the transaction on the customer's account.


Let me guide through on how to accomplish this:

  1. Click the + (plus) icon at the right top.
  2. Under Vendors, select Expense.
  3. Select the customer from the Payee drop-down.
  4. Under Category, select Accounts Receivable.
  5. Enter the amount.
  6. Click Save and closecreateexpense1.PNG createexpense2.PNG

For your guidance with the steps above, feel free to read through this article: How to enter, edit, or delete expenses.


The information I shared should help you record the credit card refund for your customer.


Should you have any other questions, please don't hesitate to ask. I'm always glad to help.

Senior Explorer ***

Re: How to apply credit card refund to credit memo in QBO?

This was perfect!! Thank you! 

Senior Explorer ***

Re: How to apply credit card refund to credit memo in QBO?

Now that the customer account is zero, how do I match this transaction with my bank? We have multiple transactions that day that totals $10,000 and than the refund of $4900 for a total deposited to checking account of $5100.  


Is there a way to link the bank download to this? 


Thank you, 

QuickBooks Team

Re: How to apply credit card refund to credit memo in QBO?

Hello there, FabianaT.


I'm glad that my colleague was able to provide you an excellent help. I'm here to provide more steps so you can link the bank download.


We can start with creating a wash account to receive the $10,000 payment. A wash/clearing account is use to move money from one account to another account when you cannot move the money directly.

  1. On the top menu, click the Gear icon.
  2. Choose Chart of Accounts.
  3. Click New.
  4. Set up the account and name it as a Wash Account. For proper guidance about accounts, I recommend reaching out to your accountant.
  5. Click Save and Close.

Next, open the payment transaction with the $10,000 amount. On its Deposit to field, change it to Wash Account.


Then, go back to the check you've created previously with my colleague. Update the check account to Wash Account. That will remove the $4900 amount on the Wash Account.

Lastly, create a bank transfer of $5100 amount. This will zero out the Wash account. The Wash account will serve as you 3rd party payment processing. 

  1. On the top menu, click the Plus icon.
  2. Choose Bank Transfer.
  3. On the Account field, enter Wash Account.
  4. Go to the Add funds to this deposit section. Select your checking account.
  5. Enter the amount and click Save and New.

Now that your account already has the $5100 transaction, you should be good to go with linking the bank downloads. For detailed instruction, you can check the Add and match downloaded banking transactions article.


I'm still here to help you more if you have follow-up banking questions. Keep me posted too on how it goes, @FabianaT. Have a wonderful day ahead.

Not applicable

Re: How to apply credit card refund to credit memo in QBO?

Thank you for your response as I have the same issue. After all steps in customer view i see  credit memo - un applied and the expense for the same amount.  The overall balance is 0 , but do i have to apply somehow those two items.


QuickBooks Team

Re: How to apply credit card refund to credit memo in QBO?

Thanks for joining this thread, Beatad.


Let's link the unapplied Credit Memo with your Expense to zero out the balance. Before doing so, make sure your expense transaction is using Accounts Receivable as the Category account. I'd be happy to walk you through the steps below:

  1. Go to Sales on the left menu.
  2. Click the Customers tab.
  3. Choose a customer.
  4. From the New transaction drop-down, select Payment.
  5. Choose the Expense and Credit Memo transactions to link.
  6. Click Save and close.



Also, you can visit our Help Articles page for QuickBooks Online if in case you need some tips and related articles.


Should you have other concerns aside from this, you can always get back to me. 

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