In this tutorial, we’ll show you how to categorize downloaded credit card transactions in QuickBooks Online. Credit card transactions imported into QuickBooks Online must be matched to an existing transaction, applied to an unpaid bill, or categorized as an expense.
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This tutorial is one of our Free QuickBooks Tutorials. You can either watch the video below, read through the step-by-step instructions, or do both. The video was made with a slightly older version of QuickBooks Online. While the process of managing downloaded credit card transactions is essentially the same, the layout of the screens is slightly different. The step-by-step instructions are from the most current version of QuickBooks Online.
Why It’s Important to Manage Downloaded Credit Card Transactions in QuickBooks Online
After you import credit card transactions into QuickBooks Online, you must tell QuickBooks Online how to classify the transactions. Imported credit card transactions do not transfer into your account register automatically but, rather, appear as transactions awaiting review in the Banking Center. Using the Banking Center, you must do one of the following for each credit card transaction:
- Match the transaction to an existing QuickBooks transaction
- Apply the transaction against an unpaid bill in QuickBooks
- Create a new expense transaction and provide an expense category
Don’t exclude transactions: While the option exists in QuickBooks, you should not exclude transactions that are imported from your credit card account. Every transaction in the credit card account, including personal transactions of the owner, must be recorded in QuickBooks Online for the credit card account to reconcile and your books to be complete. See my bookkeeping tips for advice on how to handle personal transactions of the owner.
How Do I Manage Downloaded Credit Card Transactions in the Banking Center?
Here are four steps to manage your downloaded credit card transactions in QuickBooks Online:
- Navigate to the Banking Center.
- Review downloaded transactions.
- Compare imported transactions to existing QuickBooks Online transactions.
- Create new credit card transactions for transactions not already in QuickBooks.
1. Navigate to the Banking Center
Navigate to the Banking Center by hovering over Transactions in the left menu bar and then clicking on Banking:
2. Review Downloaded Transactions
The top of the Banking Center displays each checking and credit card account that you have connected to your QuickBooks account. If you haven’t connected your credit card account yet, do so by following the instructions in How to Import Credit Card Transactions. Once your credit card account is connected, click on the balance summary at the top of the Banking Center:
The summary box for your credit card account displays the account balance reported by your bank as well as the balance from your QuickBooks account register. Transactions that are downloaded into QuickBooks are reflected already in the bank balance. However, downloaded transactions do not affect your QuickBooks balance until you review and accept them.
Don’t forget to reconcile: The bank balance and QuickBooks balance should be the same once all your transactions are reviewed. However, if there’s a difference, you’ll be able to find it when you reconcile your credit card account at the end of the month.
The orange number in the bottom-right corner of the account summary box is the number of transactions downloaded from your bank account that have not yet been reviewed and accepted, matched, or excluded. A list of transactions to review will appear in the lower half of the Banking Center under the For review tab:
Advanced settings: You can determine which columns will appear under the review tab by clicking on the settings cogwheel directly above the last column.
3. Compare Downloaded Transactions to Existing QuickBooks Transactions
It’s important to match imported transactions to existing transactions if they exist. Otherwise, the transaction you accept will be a duplicate and cause your credit card balance to be incorrect. QuickBooks searches automatically for existing transactions that match the imported transaction. If a match is found, the word “match” will appear in the action column on the far right. Clicking on Match will connect the transactions immediately, so I suggest refraining from clicking on it until you review the match.
Click anywhere in the transaction to review the suggested match, except on the suggested action in the far-right column:
QuickBooks will suggest both matches to existing transactions and matches to unpaid bills.
Matching Existing Transactions
The City of Coralville example above is a match found with an existing transaction. This match occurred because the credit card charge to Coralville was entered manually into QuickBooks at the time it was made. By clicking the green Match button, the credit card transaction will move from the For review tab to the Categorized tab, but no transaction will be created in the QuickBooks register since the transaction already exists.
Matching Unpaid Bills
QuickBooks will scan your list of unpaid bills you’ve entered previously to determine if the downloaded credit card transaction is likely a bill payment. In the example below, Paul’s Plumbing entered a bill from Mini Storage for $156.00 on September 1, 2020. They paid the bill with a credit card on September 2, 2020, but did not enter the payment in QuickBooks:
When you click Confirm, QuickBooks will create a new transaction in your QuickBooks register, recording the credit card charge as well as offsetting the unpaid bill or accounts payable (A/P).
Find Other Matches
If you made a partial payment of an outstanding bill, QuickBooks will not suggest a match automatically since the amount of the charge is different from the bill. Click Find other matches in the transaction detail to provide a list of outstanding bills and indicate which bill to apply the credit card payment.
You might also have to use the Find other matches button for matching transactions where the amounts are, in error, slightly different. You’ll need to correct the QuickBooks transaction amount to match the actual credit card charge before you can match the transactions.
4. Create New Credit Card Transactions
If the credit card transaction has not already been recorded manually in QuickBooks, and it is not a payment of an outstanding bill, you’ll need to create a new transaction. To review the transaction suggested by QuickBooks, click anywhere on the transaction (except in the Action column):
In the above example, QuickBooks suggests the charge to Costco Gas be categorized as “Car/Truck Expense: Gas.” I highly recommend you complete all fields for the transaction as if you were recording the transaction manually. The Vendor field is important, so the transaction appears with that vendor’s activity. It is especially important to complete the Billable and Customer/project fields if you expect to bill a customer for this expense. Otherwise, the payment won’t be available to add to an invoice.
Create a Rule
If adding a common transaction, you should create a rule so QuickBooks will prefill all of the transaction fields automatically instead of just the Category and Memo. Below is the Costco transaction with the Vendor, Location, and Class manually input:
Click on Create a rule at the bottom of the transaction detail to create a rule based on the information you entered in this transaction:
You must provide a name for this rule in the first field. All of the other fields were populated automatically based on the Costco transaction for which we provided detail. After saving this rule, QuickBooks will automatically record all charges described as “Costco Gas” to Car/Gas Expense with the Payee, Class, and Location fields completed. This can be a huge timesaver but set up your rules carefully to avoid mistakes.
Another tutorial is complete. You can now manage your downloaded credit card transactions by matching them to existing transactions, applying them against unpaid bills, or creating new transactions. You also learned to create a rule so QuickBooks can provide greater detail when suggesting new transactions. The next tutorial in our QuickBooks Online Training Course is How to Enter a Credit Card Refund when you receive refunds from vendors.