Final answer:
The notion that credit memos can only be used when there's an open balance is false. Credit memos address various adjustments and need not be tied to open balances. Credit cards provide a short-term loan from the issuer to the cardholder.
Step-by-step explanation:
The statement that credit memos can only be used when the customer has an open balance is false. Credit memos are issued by sellers to buyers to correct or record a reduction in the amount owed to the seller. This can occur in various circumstances such as when an item is returned, an invoice is overpaid, or there was an overcharge. While they are often applied to an open balance, credit memos can also be issued as a refund to the customer when there is no open balance, or they may be kept on account for future purchases.
When considering credit cards, they facilitate a different kind of transaction. The use of a credit card immediately transfers money from the credit card company's checking account to the seller. This transaction represents a short-term loan from the credit card company to the cardholder. At the end of the billing cycle, the user then owes the money to the credit card company, which is not directly related to the issuance of credit memos by a seller.