How to Record Credit Card Sales With a Third-party Credit Card Processor in QuickBooks

In this tutorial, we’ll show you how to record a customer credit card payment that was accepted through a credit card processor not integrated with QuickBooks. To record credit card sales in QuickBooks, you need to record the payment, processing fee, and deposit.

Thank you for taking the time to learn QuickBooks Online, our best overall pick for small business accounting software. This tutorial is designed to follow along in your own QuickBooks Online account. New subscribers can choose from a 30-day free trial or 50% off for three months.

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This tutorial is one of our Free QuickBooks Tutorials. The step-by-step instructions that follow the video offer detailed instructions with screenshots from the most recent version of QuickBooks Online.

Integrated vs Nonintegrated Credit Card Processor

This tutorial teaches you how to record customer credit card payments when the credit card processing is done completely outside of your QuickBooks Online account. An easier way to handle credit cards is to have the processing integrated with QuickBooks Online. As illustrated in the prior tutorial, QuickBooks Payments is already in QuickBooks Online, and you only need to activate the service.

In addition to QuickBooks Payments, there are many merchant services that offer QuickBooks integrations that automate the steps in this tutorial. I highly recommend using either QuickBooks Payments or installing a third-party integration from another credit card processor. However, if you’re processing credit cards outside of QuickBooks, this tutorial will teach you how to record the payment, processing fees, and deposits manually.

How to Record Customer Credit Card Payments in QuickBooks Online

1. Record Receipt of the Credit Card Payment

The first step in recording customer credit card activity is to record the credit card payment from the customer. As you’ve learned previously, customer payments can be recorded as payments on outstanding invoices or as sales receipts if an invoice were never issued. Whichever sales form you use, complete it as normal except for the payment method as illustrated below.

If recording a credit card payment on an outstanding invoice, open the Receive Payment screen by clicking New above the left menu bar, and then click Receive payment in the first column under Customers. Complete the Receive Payment screen as normal except for the payment method:

If you haven’t already issued this customer an invoice, you’ll want to create a sales receipt instead of recording a payment received. To create a sales receipt, click New at the top of the left menu bar and then click Sales receipt in the Customers column. Complete this form as normal, except for the payment method:

Whether you are using the Payment Received screen or Sales Receipt form, complete the date and payment method section as follows:

1. Payment date: Enter the date you charged your customer’s credit card.
2. Payment method: Choose the type of your customer’s credit card.
3. Reference number: Enter the transaction number assigned by your credit card processor so that this transaction can be traced from QuickBooks to your processing account in the future if needed.
4. Deposit to: It is important the credit card payment is initially deposited to your Undeposited Funds account and not directly to your bank account.

Click the green Save and close button when you have entered all the necessary information.

2. Record Deposits and Fees From Your Credit Card Processor

Most credit card processors will group multiple charges into a single deposit in your checking account. After your credit card processor transfers the funds to your bank account, you need to mirror the deposit by transferring the same credit card charges from Undeposited funds to your bank account.

Start the transfer from Undeposited Funds by clicking on the New button at the top of the left menu bar and then selecting Bank Deposit in the far-right column:

1. Account: Click the drop-down box and select the checking account where the credit card processor deposited your funds.
2. Date: Enter the date your credit card processor deposited the funds.
3. Payments included: Select the credit card payments your processor included in the current deposit carefully. Not all payments charged on the same day will be deposited into your checking account on the same day.

If your credit card processor subtracts a processing fee from the deposit, record the fee using a negative amount in the “Add funds to this deposit” section in items D through G:

D.  Received from: Select the name of your credit card processor that is withholding a fee. If not already set up, click Add new to set them  up as a vendor.

E.  Account: Choose an expense account such as “Credit Card Processing Fees.” You can click Add new to set up a new expense account.

F.  Payment method: Select Cash as the payment method.

G.  Amount: Enter the amount of the fee as a negative number.

H.  Total Amount: Verify the total amount of the deposit matches the deposit from your credit card processor.

3. Record Other Credit Card Fees

If your credit card processor charges fees other than those subtracted directly from a deposit, record an expense by clicking on New from above the left menu bar and then selecting Expense in the Vendors column:

1. Payee: Select the name of your credit card processor.
2. Payment account: Choose the bank account where the expense was withdrawn.
3. Payment date: Enter the date the expense was withdrawn.
4. Payment method: Select cash as the payment method.
5. Category: Choose an expense account to charge the credit card processing fees.
6. Amount: Enter the amount of the credit card processing fees.

Wrap Up

You’ve completed another QuickBooks tutorial. Now that you understand the considerable work necessary to record credit card transactions by hand, I hope you consider an integrated credit card processor like QuickBooks Payments. With QuickBooks Payments, you record the payment received on either an invoice or sales receipt, and QuickBooks will take care of the rest. Our QuickBooks Online Training Course will now focus on preparing financial reports, beginning with How to Prepare a Profit and Loss Statement.