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How to categorize credit card payments in QuickBooks

Crop unrecognizable woman taking credit card out of wallet

Whether you’re paying vendors or receiving customer payments, a constant flow of credit card charges is unavoidable. What’s worse is keeping up with these payments on a daily basis.

The good news is that QuickBooks Online comes with a credit categorization feature. This tool:

  • Organizes credit card transactions.
  • Speeds up accounting processes.
  • Enhances financial reporting.
  • Keeps accurate reports of your financial activities.

 So, how do you navigate it?

Keep reading to learn how to categorize credit card payments in QuickBooks, including some common errors and best practices.

How do you categorize credit card payments in QuickBooks?

Credit card payments are recorded as transactions in QuickBooks. If you’ve linked your banking information with your QuickBooks Online account, credit card payments are automatically recorded.

However, sometimes there can be errors that cause a transaction not to show. Or, you may have made a credit card payment on a different account that you need manually add.

Follow the steps below to find out how to categorize credit card payments in QuickBooks.

How to record credit card payments in QuickBooks Online

Here’s how to categorize credit card payments in QuickBooks Online:

  • Log into QuickBooks.
  • Select “Banking” from the left menu.
  • Find and select your credit card account.
  • In the “Review” tab, choose the transaction to categorize.
  • Fill in details like your vendor or consumer name, the expense category, and add custom labels if needed.
  • Choose a category from the drop-down menu, enter the amount, and complete the fields.
  • Click “Add” to let QuickBooks categorize your credit card payments.

These steps improve efficiency by outlining how to process credit card payments in QuickBooks Online the fastest way.

Pay down a credit card

To pay down a credit card in QuickBooks Online:
Navigate to “+ New” in the top left menu bar. Under the “Other” menu, select “Pay down credit card.”

A screenshot of QuickBooks Online + New menu with "Pay down credit card" highlighted.

  1. Choose the credit card you paid or add a new one if it’s not listed.
  2. Write the name of your payee if you wish you keep it on record. However, this step is optional.
  3. Enter your payment amount and the date the payment was made, then choose the bank account used to make the payment.
  4. You have the option to add a memo and any attachments you want to keep on record.
  5. When you’re finished, click “Save and Close” in the bottom right corner of the screen.

How to reconcile in QuickBooks Online

Reconciling your accounts in QuickBooks Online helps keep precise records across your bank and credit card statements.

For a step-by-step video tutorial on how to reconcile accounts in QuickBooks Online and QuickBooks Desktop, watch the video below.

To reconcile your accounts in QuickBooks Online:

  1. Click the gear icon at the top right corner of your screen, and under the “Tools” menu, select “Reconcile” in the dropdown menu.
  2. Choose the bank or credit card account you want to reconcile from the “Account” dropdown menu.
  3. Enter the ending balance and date from the credit card statement.
  4. Click “Start reconciling.”

A screenshot of QuickBooks Online reconcile accounts window with options showing account selection, balances, and date.

  1. You’ll be given a list of transactions in the account where you can compare transactions in QuickBooks Online with the transactions on your credit card statement. If the transactions match those in your statement, click the circle on the right side of the transaction to checkmark it. If they don’t match, keep the circle empty.

  1. At the top right of the screen, QuickBooks will show if there’s a difference in transaction amounts to help you check if your accounts are balanced or if you still have transactions that aren’t adding up.

Make a payment after reconciling your credit card

After reconciling your credit card, you can enter any missing transactions from the statement to balance the difference if necessary.

To do this, follow the step-by-step instructions under “Pay down a credit card” in the section above and enter the difference amount as your transaction.

How to categorize credit card payments in QuickBooks: Top options

Understanding how to categorize credit card payments in QuickBooks also means learning about its different categorization options.

Categorize individual credit card transactions

When it comes to receiving payments via credit card, PayPal, or other payment methods, categorizing individual transactions is the norm. To achieve this, just follow the usual steps outlining how to categorize credit card payments in QuickBooks Online.

As you continue using QuickBooks, it learns to recognize and suggest categories for familiar credit card transactions. You can always adjust these if needed.

Also, keep an eye out for “Match” instead of “Add” on certain transactions. This feature helps avoid duplicates for:

  • Pre-existing bills.
  • Invoice payments.
  • Bank deposits.

All you need to do is verify that the balance matches, then click “Match.”

Learning how to categorize credit card payments in QuickBooks boosts your efficiency and makes learning how to process credit card payments in QuickBooks Online easier.

Split transactions among categories

Sometimes, you may need to divide a credit card transaction across categories.

Imagine you’ve got a receipt for $200, which includes $120 for office supplies and $80 for travel expenses. You can easily split this in QuickBooks Online. Simply allocate $120 to the “Office Supplies” category and $80 to “Travel Expenses.” This way, your financial reports are as accurate as possible to reflect each type of expense.

Here’s how to split transactions among categories:

  1. Log into QuickBooks Online.
  2. Navigate to “Banking” in the left sidebar.
  3. Select the transaction you want to split.
  4. Click “Edit” or the pencil icon.
  5. Choose “Split” in the transaction details.
  6. Assign amounts to each category in the split.
  7. Save the transaction.

By mastering how to categorize credit card payments in QuickBooks, you’ll improve your:

  • Business efficiency.
  • Financial accuracy.
  • Operational organization.

Common errors when categorizing payments into QuickBooks

Now that you know how to categorize credit card payments in QuickBooks, let’s identify some common errors and how to avoid them.

Not using the “Split” feature

Failing to use the “Split” feature on credit card statements can result in inaccurate tracking when a transaction spans multiple respective categories.

To fix this, get comfortable with the “Split” function and use it for multi-category transactions. Also, make sure you’ve assigned each transaction to the correct credit card account.

Incorrect account selection

When categorizing credit card payment details, selecting the wrong account leads to issues.

For example, choosing an expense account instead of a credit card liability account results in incorrect transactions and financial statements.

To avoid this, always double-check your account selections to make sure they match the transaction and credit card type, like payment vs. direct expense. Also, ensure that your bank and credit card details are correct to prevent inaccuracies.

Failing to update categories

Failing to regularly review and update your expense categories results in misclassifications.

To ensure accuracy when recording payments, schedule routine checks of your expense categories. This lets you make necessary adjustments as your business shifts over time.

Understanding these common errors is crucial in learning how to process a credit card payment in QuickBooks Online.

Best practices when categorizing credit card payments

As you learn how to categorize credit card payments in QuickBooks, adopting best practices eases your bookkeeping burdens.

Here are some best practices to keep in mind:

  • Regularly reconcile: Regularly match your credit card transactions with bank statements for financial accuracy.
  • Set up banking rules: Use QuickBooks’ banking rules to automatically categorize bank transactions. This saves you valuable time and reduces manual errors.
  • Separate personal and business expenses: Carefully categorize transactions, especially if the same credit card is used for personal and business expenses. This maintains an accurate and comprehensive overview of your financial health for informed decision-making.
  • Train your team: Equip your team with the skills to handle transaction details in QuickBooks efficiently.
  • Review reports regularly: Use QuickBooks reports to check for any categorization errors.

These best practices are also useful when learning how to process a credit card payment in QuickBooks Online.

How QuickBooks users shorten the lead-to-cash cycle with Method

Method is the #1 lead-to-cash automation tool for QuickBooks users. It makes credit card payments in QuickBooks even easier, along with offering several additional benefits.

Method’s two-way, real-time sync with your accounting software reduces manual data entry and keeps your business finances current and up to date. This leads to fewer errors, which frees up more time for activities that add value to your business. It also promotes accurate financial decisions through data-driven insights.

What’s more is that Method’s automation capabilities speed up and simplify your payment process for a better bottom line.

Conclusion: How to categorize credit card payments in QuickBooks

Using QuickBooks’ reconciliation tool to balance your accounts is the best way to keep an accurate recording of your financial records.

By reconciling your accounts, you’ll simplify your financial management and discover valuable insights into your business’ revenue.

How to record credit card payments in QuickBooks FAQs

What constitutes a valid credit card expense?

A valid credit card expense is one that’s necessary for your business and fits your company’s spending rules. It should be solely for business-related expenses, and you need to back it up with receipts and follow tax guidelines.

What kind of expenditure is credit card payment?

A credit card payment is treated as a liability payment in QuickBooks, as it reduces your credit card balance.

Note that QuickBooks doesn’t count credit card balance payments as a direct business expense, but rather as the repayment of borrowed funds.

Is it OK to exclude credit card payments in QuickBooks?

No, excluding payments to credit cards, including partial payments, is not recommended in QuickBooks. Doing so leads to inaccuracies in your financial records and reports.

Recording all transactions, including credit card statements, ensures a complete and accurate financial overview.

See how Method simplifies your credit card payments.

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