Card payments and processor payouts
A card payment applied in full, the processor's fee as an expense, and the payout through a clearing account that has to come back to zero.
Alder paid INV-1008, $4,000, by card through Northwind's processor. The processor's fee at an assumed 2.9% + 30¢ a charge is $116.30, so the payout that reached the bank was $3,883.70. Record the invoice as paid in full, because Alder paid in full, and book the fee as an expense. Some processors also hold back a reserve against future chargebacks; that's still Northwind's money, owed by the processor, and not cash until it's released. A clearing account (1050, new to Northwind's chart, beside 6700 Merchant fees) stands in for the processor balance and has to come back to zero.
Alder pays INV-1008 by card: the invoice is paid in full.
| Account | Debit | Credit |
|---|---|---|
| 1050Processor clearing | 4,000.00 | |
| 1200Accounts receivable (INV-1008) | 4,000.00 | |
| Balanced | 4,000.00 | 4,000.00 |
The processor's fee on the charge.
| Account | Debit | Credit |
|---|---|---|
| 6700Merchant fees | 116.30 | |
| 1050Processor clearing | 116.30 | |
| Balanced | 116.30 | 116.30 |
The payout lands in the bank. Clearing is back to zero.
| Account | Debit | Credit |
|---|---|---|
| 1000Cash | 3,883.70 | |
| 1050Processor clearing | 3,883.70 | |
| Balanced | 3,883.70 | 3,883.70 |
Wrong
Apply 3,883.70 to the invoice and leave 116.30 open, or write it off.
Right
Apply 4,000 to the invoice; 116.30 to merchant fees; 3,883.70 to cash. Clearing nets to zero.
Booking the payout as the receipt understates both the payment and the cost of taking it, leaves the invoice open by the fee, and won't tie to the processor's report or to Form 1099-K.
Card
- Good at
- Paid on the spot
- No bank details to send
- Watch for
- About 2.9% + 30¢ a charge at one processor's standard rate
- Cardholders can file chargebacks
- Best for
- Self-serve and small invoices
ACH
- Good at
- Cheap: one processor charges 0.8% capped at $5 for ACH debit
- Easy to automate
- Watch for
- A day or more to settle
- Some returns allowed after the fact
- Best for
- Recurring B2B invoices
Check
- Good at
No processing fee
- Watch for
- Slow, and often arrives without remittance
- Someone has to deposit it
- Best for
- Customers who insist
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- Background reading — not an authority
- Stripe — Pricing (opens in a new tab)One processor's published US card rateFree to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- PayoutA payment processor's transfer to the merchant's bank: charges less refunds, chargebacks, fees and any reserve held. A net figure, booked gross through a clearing accountConvention
- Clearing accountAn account that should net to zero once both sides of a flow have posted — payroll clearing, GR/IR, a payment processor clearing account; a residual balance is the exceptionConvention
- ChargebackA card payment reversed by the cardholder's issuing bank on a cardholder claim — fraud, goods not received, not as described. The processor debits the merchant the amount plus a fee; the merchant may contest it with evidence (representment)Convention
- Processor reserveCard settlements a payment processor withholds against future chargebacks and refunds — a rolling percentage held for a set number of days, a fixed amount, or an upfront hold. It is the merchant's receivable from the processor, not cash on handConvention
- ACHThe Automated Clearing House network — the US batch system for electronic credits and debits under Nacha rules; same-day to two-day settlement, with limited return rights
See also
- Journal entry for a Stripe payoutBook charges gross: debit Stripe clearing and credit Revenue for every charge, and debit Sales returns and allowances and credit Stripe clearing for refunds. When the payout lands, debit Cash for the payout and Merchant fees for the fees, and credit Stripe clearing, which should then be zero.
- Card and ACH payments: applying and reconciling themHow customer card and ACH payments land in the bank net of fees, how to apply them to invoices, handle partial payments and reconcile the deposit.
- How to reconcile Stripe payouts to your booksA Stripe payout is charges less fees, refunds and disputes, batched across days. How to book it gross, tie it to the bank, and keep revenue right.
- ChargebacksThe reversal of a card payment after the cardholder disputes it with their bank. The disputed amount and a dispute fee are pulled from your processor balance while the card issuer decides.