The two ways to refund a credit memo in QuickBooks Online
A credit memo in QuickBooks Online is money you owe a customer—either because you overcharged them, they returned goods, or you issued a discount after the invoice was paid. You have two choices: use the credit to reduce what they owe on a future invoice, or refund the money back to them. If you choose to refund, QuickBooks lets you do it in two ways: by writing a check or by recording a credit card refund (if they paid by card).
The method you pick depends on how the customer originally paid you. If they paid by check or bank transfer, you'll write them a check. If they paid by credit card, you'll record a refund to that card. Both routes take just a few clicks, but the steps are different.
Key Takeaways
- A credit memo represents money you owe a customer and must either be applied to a future invoice or refunded as cash.
- To refund by check, open the credit memo, click Refund, choose Check, and QuickBooks will create a check you can print or send electronically.
- To refund to a credit card, open the credit memo, click Refund, choose Credit Card, and enter the card details if QuickBooks doesn't have them on file.
- Once you record a refund, QuickBooks marks the credit memo as used and updates your bank or credit card account in your books.
- You can reverse a refund by deleting it before it clears, but after that you'll need to record a manual adjustment or create a new invoice.
How to refund a credit memo by check
Open the credit memo you want to refund. You can find it by going to + New button, then looking in your recent transactions, or by searching for the customer's name in the search bar. Click on the credit memo to open it.
At the top right of the credit memo, click the Refund button. A window will pop up asking how you want to refund the money. Select Check. QuickBooks will ask you which bank account the check should come from—choose the account where you keep your operating funds.
Review the refund amount (it should match the credit memo total) and the customer's mailing address. If the address is wrong or missing, update it now so the check goes to the right place. Click Save and Close. QuickBooks creates a check in your Checks to Print queue. You can print it immediately, batch it with other checks, or send it electronically if your bank supports it.
How to refund a credit memo to a credit card
Open the credit memo and click Refund. This time, select Credit Card from the dropdown. QuickBooks will show you any credit cards it has on file for that customer. If the card they used is listed, select it and click Save and Close.
If QuickBooks doesn't have the card on file, you'll need to enter it manually. Click Add New and type in the card number, expiration date, and CVV. Make sure the cardholder name and billing address match what the customer provided. Once you save, QuickBooks records the refund and marks the credit memo as used.
The refund typically appears on the customer's card statement within one to three business days, depending on their bank. Unlike a check, you don't have to print or mail anything—it's instant on your end.
What happens in your books after you record a refund
Once you click Save, QuickBooks does three things: it marks the credit memo as Refunded, it creates a check or credit card transaction in your bank register, and it reduces your accounts receivable (the money customers owe you). The refund shows up in your bank or credit card account as a negative number—money going out.
If you reconcile your bank account in QuickBooks, the check or refund will appear in your reconciliation list. Match it to the actual transaction from your bank to keep your books in sync. If you use a payment processor like Square or Stripe, the refund may show up there too, and you'll need to record it in QuickBooks separately.
How to undo a refund if you made a mistake
If you recorded a refund by mistake, the fastest way to undo it is to delete the check or credit card refund before it clears your bank. Go to your Checking or Credit Card account, find the refund transaction, click it, and select Delete. QuickBooks will ask if you want to delete the refund—say yes. The credit memo will go back to Open status.
If the refund has already cleared your bank or credit card, deleting it will create a mismatch during reconciliation. In that case, create a new invoice for the customer to reverse the refund, or contact your accountant about recording an adjustment. Do not delete a cleared transaction without fixing your reconciliation afterward.
Refunding only part of a credit memo
QuickBooks doesn't let you refund half a credit memo directly. If you want to refund part of it and apply the rest to a future invoice, you have two options. First, you can create a new credit memo for the amount you want to refund, then refund that one. Second, you can refund the whole credit memo, then create a new invoice to charge the customer back for the portion you didn't mean to refund.
The cleaner route is usually the first: split the credit memo before you refund. Go to the original credit memo, note the amount you want to refund, then create a second credit memo for that amount only. Refund the new one and apply the original to their next invoice.
Refunding a credit memo when you don't have the customer's payment details
If the customer paid by check or bank transfer and you don't have their banking information, you'll need to ask them for it before you can refund. Call or email and ask for their mailing address (for a check) or their bank details (for a direct deposit). Once you have the information, you can record the refund in QuickBooks.
If they paid by credit card but QuickBooks doesn't have it on file, you'll need to ask them for the card number again. Many customers are hesitant to provide this, so offering to mail a check instead is often easier. If they insist on a card refund, make sure you have a secure way to collect the number—never ask for it by email or text.
Frequently Asked Questions
Can I refund a credit memo partially?
QuickBooks doesn't split refunds, but you can create a second credit memo for the amount you want to refund, then refund only that one. The original credit memo can stay open and be applied to a future invoice.
What if I refunded the wrong customer by mistake?
Delete the refund transaction from your bank or credit card account before it clears. The credit memo will revert to Open status. If it's already cleared, you'll need to record a manual adjustment or create an invoice to reverse it.
How long does a credit card refund take to show up?
Credit card refunds typically appear on the customer's statement within one to three business days. Some banks take longer. The refund is recorded in QuickBooks immediately, but the customer won't see it until their bank processes it.
Do I need to print a check or can I send it electronically?
QuickBooks can print checks or send them electronically through your bank if your bank supports it. Check your bank settings in QuickBooks to see if electronic check delivery is turned on. Otherwise, you'll print and mail the check yourself.
What if the customer's credit card has expired since they paid the original invoice?
You can't refund to an expired card. Offer to mail a check instead, or ask the customer for their current card details. If they don't respond, hold the credit memo open and apply it to their next purchase.