diff --git a/server/graphql/v2/mutation/VendorMutations.ts b/server/graphql/v2/mutation/VendorMutations.ts
index 63ca0bfa66d..413e43de0ed 100644
--- a/server/graphql/v2/mutation/VendorMutations.ts
+++ b/server/graphql/v2/mutation/VendorMutations.ts
@@ -8,7 +8,8 @@ import { v4 as uuid } from 'uuid';
 import ActivityTypes from '../../../constants/activities';
 import { CollectiveType } from '../../../constants/collectives';
 import { getDiffBetweenInstances } from '../../../lib/data';
-import models, { Activity, LegalDocument } from '../../../models';
+import models, { Activity, LegalDocument, Op } from '../../../models';
+import { ExpenseStatus } from '../../../models/Expense';
 import { checkRemoteUserCanUseHost } from '../../common/scope-check';
 import { BadRequest, NotFound, Unauthorized, ValidationFailed } from '../../errors';
 import { idDecode, IDENTIFIER_TYPES } from '../identifiers';
@@ -193,13 +194,14 @@ const vendorMutations = {
       }
 
       if (args.vendor.payoutMethod) {
+        let payoutMethod;
         const existingPayoutMethods = await vendor.getPayoutMethods({ where: { isSaved: true } });
         if (!args.vendor.payoutMethod.id) {
           if (!isEmpty(existingPayoutMethods)) {
             existingPayoutMethods.map(pm => pm.update({ isSaved: false }));
           }
 
-          await models.PayoutMethod.create({
+          payoutMethod = await models.PayoutMethod.create({
             ...pick(args.vendor.payoutMethod, ['name', 'data', 'type']),
             CollectiveId: vendor.id,
             CreatedByUserId: req.remoteUser.id,
@@ -207,10 +209,24 @@ const vendorMutations = {
           });
         } else {
           const payoutMethodId = idDecode(args.vendor.payoutMethod.id, IDENTIFIER_TYPES.PAYOUT_METHOD);
+          payoutMethod = await models.PayoutMethod.findByPk(payoutMethodId);
           await Promise.all(
             existingPayoutMethods.filter(pm => pm.id !== payoutMethodId).map(pm => pm.update({ isSaved: false })),
           );
         }
+
+        // Since vendors can only have a single payout method, we update all expenses to use the new one
+        await models.Expense.update(
+          { PayoutMethodId: payoutMethod.id },
+          {
+            where: {
+              FromCollectiveId: vendor.id,
+              status: {
+                [Op.in]: [ExpenseStatus.APPROVED, ExpenseStatus.DRAFT, ExpenseStatus.ERROR, ExpenseStatus.PENDING],
+              },
+            },
+          },
+        );
       }
       return vendor;
     },
diff --git a/test/server/graphql/v2/mutation/VendorMutations.test.ts b/test/server/graphql/v2/mutation/VendorMutations.test.ts
index 859ffb09bf5..0279727cb4c 100644
--- a/test/server/graphql/v2/mutation/VendorMutations.test.ts
+++ b/test/server/graphql/v2/mutation/VendorMutations.test.ts
@@ -4,7 +4,14 @@ import gql from 'fake-tag';
 import { CollectiveType } from '../../../../../server/constants/collectives';
 import models from '../../../../../server/models';
 import { LEGAL_DOCUMENT_TYPE } from '../../../../../server/models/LegalDocument';
-import { fakeCollective, fakeHost, fakeTransaction, fakeUser } from '../../../../test-helpers/fake-data';
+import {
+  fakeCollective,
+  fakeExpense,
+  fakeHost,
+  fakePayoutMethod,
+  fakeTransaction,
+  fakeUser,
+} from '../../../../test-helpers/fake-data';
 import { getMockFileUpload, graphqlQueryV2 } from '../../../../utils';
 
 describe('server/graphql/v2/mutation/VendorMutations', () => {
@@ -228,6 +235,55 @@ describe('server/graphql/v2/mutation/VendorMutations', () => {
       const location = await vendor.getLocation();
       expect(location.address).to.equal('Zorg Avenue, 1');
     });
+
+    it('invalidates existing Payout Method and updates existing Expenses', async () => {
+      const vendor = await fakeCollective({
+        type: CollectiveType.VENDOR,
+        ParentCollectiveId: host.id,
+        data: { vendorInfo: vendorData.vendorInfo },
+      });
+      const existingPayoutMethod = await fakePayoutMethod({ CollectiveId: vendor.id, isSaved: true });
+      const existingExpense = await fakeExpense({
+        FromCollectiveId: vendor.id,
+        PayoutMethodId: existingPayoutMethod.id,
+        status: 'PENDING',
+      });
+      const existingPaidExpense = await fakeExpense({
+        FromCollectiveId: vendor.id,
+        PayoutMethodId: existingPayoutMethod.id,
+        status: 'PAID',
+      });
+      const newVendorData = {
+        legacyId: vendor.id,
+        payoutMethod: {
+          type: 'PAYPAL',
+          name: 'Zorg Inc',
+          data: { email: 'zorg@zorg.com' },
+          isSaved: true,
+        },
+      };
+      const result = await graphqlQueryV2(
+        editVendorMutation,
+        {
+          vendor: newVendorData,
+        },
+        hostAdminUser,
+      );
+      result.errors && console.error(result.errors);
+      expect(result.errors).to.not.exist;
+
+      await existingPayoutMethod.reload();
+      expect(existingPayoutMethod.isSaved).to.be.false;
+
+      await existingExpense.reload();
+      expect(existingExpense.PayoutMethodId).to.not.equal(existingPayoutMethod.id);
+
+      await existingPaidExpense.reload();
+      expect(existingPaidExpense.PayoutMethodId).to.equal(existingPayoutMethod.id);
+
+      await models.PayoutMethod.destroy({ where: { CollectiveId: vendor.id }, force: true });
+      await models.Expense.destroy({ where: { FromCollectiveId: vendor.id }, force: true });
+    });
   });
 
   describe('deleteVendor', () => {