What Is a Credit Memo?
A credit memo transaction occurs when money is added to an account. Credit memos are most often associated with banks and other businesses that sell products and services. Banks will issue credit memos for various transactions, including issuing interest on a customer’s savings account balance, crediting a customer for an overpayment, and refunding a bank account fee.
A business that sells goods may issue a credit memo instead of a refund to the buyer when a product is returned. The credit memo should include a written explanation of the transaction, along with a reference number.
Credit Memo Examples
Here are some examples of when a business might use a credit memo:
The credit of bank service charge or bank fee
A credit of previous bank charge (mortgage appraisal fee)
Bill payment credit
Credit for next purchase
Other Times a Credit Memo Is Used
Credit memos are often used to correct an error or refund a customer when a product arrives damaged to the shipping address…