Are You Making This Common Credit Card Mistake in QuickBooks?

Here’s the proper way to manually record credit card transactions in QuickBooks Online

Written by: Kristie Van Pay, Prosperity Bookkeeping LLC
November 6, 2019

A common mistake I often see QuickBooks users make is to record their credit card transactions on the check they write to the credit card company. They enter a check in QuickBooks and then break out the expenses on their statement to the proper accounts right there on the check. While this gets the job done (to a degree), it has some disadvantages.

If you don’t pay your balance in full each month, it can get really tricky knowing how to classify your statements as time marches on. You may have to go back two or more statements to see which charges you have not paid yet to know which accounts your expenses should go to.

If you don’t pay your balance in full each month, your financial statements are not accurate for two reasons. One, you are recording the expenses in the month you paid the credit card, not the month they actually occurred. This gives you a false impression of your earlier months performance. Also, your balance sheet is inaccurate because it doesn’t show that you owe someone (the credit card company) money (the balance on your statement as of the closing date).

When you record your credit card purchases under the check to the credit card company, they all show up under the name of your credit card company. This means that if you run a report by vendor, you won’t be able to see your credit card transactions under the proper vendor name. Why might it be beneficial for you to see that? Occasionally I like to run a report by vendor to see who my money is going to. How much am I spending with each vendor? Do I have recurring subscriptions being charged to me that I am no longer using? All of my recurring charges (like software subscriptions) go on my credit card. When I run a report by vendor, I can quickly and easily see if there are any vendors I am no longer using and therefore need to cancel my subscription. This would not be possible to see if they were all showing up under the name of the credit card.

If you are already using QuickBooks Online, you may or may not be aware that you can connect your credit card account to QuickBooks and have the transactions feed in through the QuickBooks Online bank feed area. But sometimes we might need to add credit card transactions to QuickBooks manually for various reasons. One reason might be that you do not use online banking. Another may be that you don’t know your username and password for online banking and you haven’t taken the time to fix it. Maybe your credit card provider doesn’t integrate with QuickBooks or maybe you have some very historical transactions that need to be added that can’t be imported to the bank feed. Whatever the reason, you are left to manually enter these transactions. If this true for you, here is a video that walks you through the proper way to manually enter credit card transactions in QuickBooks Online.