The pages and pages of "explanation" above seem to me to do little to demystify the original question, which is a question that I also have.

Perhaps it would be more useful to explain what the two options actually do rather than trying to stab at a scenario or two to describe when it might be useful to use one versus the other, which always leaves you somewhat guessing what it really actually does.

I would like to work out how it really works, so I can figure out my own question...

I have a credit card. It is actually my personal card, linked to the company in Quickbooks Online because sometimes I use it for business transactions. Even though it is my card (not a company card), QBO thinks of it as a company liability in the balance sheet, which is fine I think.

If I make a repayment on the card out of electronically transferred cash from my personal bank account (that is not linked to QBO) then I will add the amount I pay on the card to the amount the company needs to pay me back - by adding a similar amount to the Directors' Loan liability account.

So I am moving an amount of funds from the directors loan account to the card account. Take money off the card debt (owed to the bank) and put it on the directors loan debt (owed to me).

The card transactions are linked and loaded into the card statement. This is why I see the transaction appearing in my Banking "To Review" section. Now, the question is, what option do I select for making the payment in there?

Let's say I pay $100 off the card from my personal account. I think I want -$100 added to the credit card balance (I paid it off, the liability is reduced). And at the same time I want +$100 added to the directors loan liability (the company owes me more). And I want the transactions linked or matched so I know what was which.

So I think I am doing a CREDIT CARD PAYMENT which is also a TRANSFER. Note I am the only director, so I don't need to split up debts in the directors loan account; I don't need any additional labelling.

Which of the two cryptic options should I select in this case? Does it even matter? What will happen when I do one vs the other?

FWIW, my guess is the two options functionally do the same thing to the ledger balances.