Credit memos, like credit balances, can be used to pay off any of the outstanding invoices in the system that are associated with the same billing account.
A credit memo (like a credit balance) can be added to a payment. When this happens, the “new” money from the payment is used first in paying off outstanding invoices, followed by as much of the credit memo as needed. If only part of the money within a credit memo is used to pay off outstanding invoices, the credit memo, with its new balance, remains available.
The Payment Details screen below shows that $16 from a credit memo—identified as Inv#9—was added to a $50 payment to pay off a $66.00 invoice (not shown). If the credit memo—Inv#9—originally contained a $100 credit, after this payment, the credit memo would remain, but with an $84 balance, which can be applied to other invoices when needed.