Credit Note

A credit note is a document that lowers the amount a customer owes on an invoice that has already been finalized. Because a finalized invoice is legally immutable in most tax regimes, you don't edit it — you issue a credit note against it to record the correction on the books.

When you'd issue one

• You billed the wrong amount and need to correct a finalized invoice.
• A customer returns a product or cancels part of an order after the invoice is out.
• You're granting a goodwill discount or waiving a charge that was already invoiced.

A credit note can cover the whole invoice or just some line items. It leaves a clean audit trail that ties the adjustment back to the original invoice.

How Stripe handles it

In Stripe, a credit_note is created against a finalized invoice. For an unpaid invoice, the credit note simply reduces the remaining balance owed. For a paid invoice, the credited amount has to be accounted for in one of three ways, and the three must sum to the credit note total:

1. refund_amount — money returned to the customer's original payment method as a refund.
2. credit_amount — added to the customer's Stripe balance and applied automatically to their next invoice.
3. out_of_band_amount — recorded as credited outside Stripe (for example, a bank transfer you made manually).

Credit note vs refund

A refund is the actual movement of money back to the customer. A credit note is the accounting record of a downward adjustment, which may or may not involve a cash refund — it can instead post a credit to the customer's balance. A partial refund and a partial credit note often go together: the credit note documents the reduction, and the refund executes it. Credit notes also flow into revenue recognition, reversing previously recognized revenue tied to the corrected line items.