This article is part of a larger series on Accounting Software.
In this tutorial, we’ll show you how to process a credit card payment in QuickBooks Online using QuickBooks Payments (formerly known as Intuit Merchant Services). When you accept credit card payments in QuickBooks Online via QuickBooks Payments, the revenue, cash received, and processing fee will be reflected in the proper accounts automatically after the payments are processed.
We’re delighted you’re taking the time to learn QuickBooks Online, our best overall pick for small business accounting software. This tutorial is designed for you 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.
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.
Why You Should Accept Credit Card Payments
Nowadays, most people don’t carry cash, and few people write checks. According to a study by the Federal Reserve, only 10% of payments $25 or more were made in cash during 2018 for their sample group of consumers. Nearly every small business needs to accept credit cards as a form of payment.
While accepting credit card payments will cost you a fee, it will likely pay for itself with better cash flow. Customers can pay online immediately upon receiving an emailed invoice, rather than printing out the email and hoping it doesn’t get lost by the next time they decide to write checks.
What Are the Benefits of using a QuickBooks Payments Account?
One of the benefits of using QuickBooks Online is the ability to sign up for QuickBooks Payments. Some of the benefits of using QuickBooks Payments are:
- There is nothing to install for QuickBooks Payments to work with QuickBooks Online.
- Since QuickBooks Payments is integrated into QuickBooks, your accounts and financial statements are always up-to-date.
- By clicking the Pay Now button on their emailed invoices, your customers can make payments online.
- Using the QuickBooks Online Mobile App, you can accept payments using your mobile device.
- Payments are deposited to your bank account, on average, within two or three business days after the transaction date.
Setting Up QuickBooks Payments in QuickBooks Online
Before accepting credit card payments, you need to set up your QuickBooks Payments account through QuickBooks Online following these steps:
- Navigate to Payment settings by clicking on the gear icon, choosing Account and Settings, and then clicking Payments.
- Start the QuickBooks Payments application by clicking Learn more.
- Designate a QuickBooks bank account for deposits.
- Review Payments settings and choose an expense account for processing fees.
1. Navigate to Payment Settings
Click on the gear icon in the upper-right corner of your QuickBooks Online screen and then select Account and settings under Your Company in the first column:
From the Account and Settings screen, click on Payments in the left menu bar:
2. Apply for a QuickBooks Payments Account
To apply for a QuickBooks Payments account, click on the green Learn More button in QuickBooks Online Payments settings:
After clicking Learn more, you’ll be taken to the Payments account application consisting of three sections: Business info, Personal info, and Bank:
Click Start and follow the onscreen instructions to complete each section. When all three sections are complete, click the green Activate Payments button on the bottom of the screen.
3. Designate Bank Account for Payments
After activating your payments account, QuickBooks will ask which of your bank accounts should receive your credit card deposits and be charged for your credit card fees:
Click the drop-down box under Bank account and choose the account where funds should be deposited. If you haven’t already added the bank account to your chart of accounts, click Add New from the drop-down box. When you have selected the account, click the green Save button.
4. Review Payment Settings
Navigate to the payment settings screen as you did in step one by clicking on the gear icon, selecting Account and settings, and then clicking on Payments. Now that you’ve signed up for QuickBooks Payments, your payment settings screen looks like this:
- Merchant Details: Click the green Manage account button to be taken to your QuickBooks Payments account.
- Deposit Accounts: The bank account listed in this section will be used to deposit your credit card proceeds as well as withdraw processing fees. Changing the bank account here will not affect the QuickBooks account in which the transactions are recorded.
- Chart of Accounts: This section identifies the QuickBooks bank account to record deposits and the QuickBooks expense account to categorize the processing fees. To designate an account to record processing fees, click anywhere in the Chart of Accounts section:
Click on the drop-down menu next to Processing fees and choose an expense account to accumulate your credit card processing fees. You can select Add New to create a new account. After selecting an expense account, click the green Save button.
Record a Credit Card Payment Using a Sales Receipt
You learned to create and sent sales receipts in an earlier tutorial. Now that you have a QuickBooks Payments account, you can also issue sales receipts to record customer payments via credit cards, debit cards, and bank transfers. Follow these steps to process a credit card payment in QuickBooks Online with a sales receipt:
- Create a new sales receipt.
- Choose the type of credit card under Payment method and click Enter Credit Card Details.
- Save and send the sales receipt to process the transaction.
- Verify the credit card transaction processed by reopening the sales receipt and clicking Transaction processed under Payment method.
1. Create a Sales Receipt
Click New at the top of the left menu bar and then select Sales receipt under customers in the first column:
2. Enter Credit Card Information
Most of the sales receipt will be completed the same as if you’re receiving cash or check, as explained in the prior tutorial. To accept payment via a credit card, debit card, or bank transfer, click the drop-down box under Payment method and choose the form of payment:
After selecting the payment method, click on Enter credit card details to input the customer’s credit card account information:
After inputting all the credit card information, click Use this info. The credit card transaction has not yet been processed, and you’ll receive a message that you have 10 minutes to process the transaction before the credit card information is removed from the sales receipt. After acknowledging you have 10 minutes, you’ll be returned to the sales receipt screen.
3. Save Sales Receipt and Process Credit Card Payment
The Sales Receipt screen now shows the last four digits of the credit card number that will be charged. To process the transaction, click the green Save and send button.
4. Verify the Credit Card Transaction Processed (Optional)
Reopen the Sales Receipt by hovering over Sales in the left menu bar, clicking on All Sales, and then find the sales receipt transaction you just created. After opening the sales receipt, verify that it reads “Transaction processed” under the Payment method:
Click on Transaction processed to view the details of the transaction.
You can print the transaction details by clicking the Print button or issue a refund to the customer by clicking Refund.
Record a Credit Card Payment on an Invoice
You can record a credit card payment on an outstanding invoice manually by following these steps:
- Open a Receive Payment screen by clicking New above the left menu bar and selecting Receive Payment in the first column under Customers.
- Enter the credit card information in the Receive Payment screen.
- Save the payment to process the credit card transaction.
Save time: These steps are unnecessary if your customer pays an invoice online by clicking Pay Invoice in the email sent to them. You can enable online payments by clicking the gear icon in the upper-right corner of the screen, selecting Company settings in the first column, and then selecting Sales.
1. Navigate to the Receive Payment Screen
Click on New above the left menu bar and then select Receive Payment in the first column:
2. Enter the Credit Card Information in the Receive Payment Screen
The receive payment screen should be completed as shown in a prior tutorial, except the payment should be changed to a credit card. Click the drop-down menu under Payment method and select the type of credit card:
Click the Enter credit card details to open a window to input the customer’s credit card account information:
Once the credit card information is entered, click the Use this info button to continue. The credit card has not yet been charged, and you have 10 minutes to complete the transaction before the credit card information is removed.
3. Save the Payment to Process the Credit Card Transaction
The receive payment screen will now show the last four numbers of the credit card to be charged:
Click the green Save and close button to process the credit card transaction and charge your customer’s credit card.
What Happens Next
The credit card payments you received will not be reflected in your bank account register until the funds are transferred from QuickBooks Payments. Once the funds are transferred to your bank, QuickBooks will record the deposits and related processing fees to the account registers you specified in the QuickBooks Payment options discussed above.
Congratulations on finishing another of our QuickBooks tutorials. You can now process credit card transactions using QuickBooks Payments. The next tutorial in our QuickBooks Online Training Course is How to Manage Credit Card Sales with a Third-party Credit Card Processor, where we’ll teach you how to enter credit card sales when using a non-integrated credit card processor.