Tips for pre-authorized debits (PADs)

Pre-authorized debits (PADs) are a convenient way to pay your bills and make other payments automatically. Instead of sending a payment yourself, you give a company or financial institution permission to electronically take money from your bank account when the payment is due. It's a great way to pay your mortgage, utilities, membership dues, donations, and insurance premiums. PADs can also be used to transfer funds from your bank account to your Registered Retirement Savings Plan (RRSP), for example.

What you need to know when you’re signing up for PADs

You can sign up for PADs if the organization you want to pay offers this option. You should contact that organization directly to find out if they do.

To get started, you’ll need to complete an agreement with the organization you want to pay. This agreement can be completed on paper or electronically (online or by telephone, for example).

If you sign up electronically, you should receive a written confirmation of the details of the agreement a minimum of three days before the first withdrawal from your account.

You may be asked to give a blank cheque to confirm your bank account information. To protect yourself against fraud, make sure you write "VOID" in ink on the front of the cheque, and don't sign it.

You should keep a copy of the agreement and/or written confirmation for your reference. Remember to check your bank account regularly to make sure that the PADs are withdrawn according to your agreement.

What to do if a biller takes money out of your bank account incorrectly

You should inform the billing organization immediately if one of their PADs isn’t in accordance with the terms of your agreement (e.g. different amount or date), or processed after you've cancelled it.

If you’re unsuccessful in resolving the issue with the biller, or if you wish to contact your financial institution first, you can ask your financial institution to reverse the incorrect transaction and return the funds to your account. You must do so within 90 days from the date of the incorrect PAD.

How to cancel a PAD agreement

You should send your cancellation request to the biller with whom you've set up the PAD agreement. The cancellation procedure should be specified in your agreement. If not, notify the biller in writing and keep a record.

You may seek the advice of your financial institution, but this should be a last resort. Your financial institution may not be able to assist you, as the payor's PAD agreement is a contract between you and the biller.

Once the agreement is cancelled, check your account records to confirm that the PADs have stopped. If they continue, contact the biller and ask why. If you aren't satisfied with their response or if you wish to contact your financial institution first, you can seek reimbursement through your financial institution within 90 days.

"Review your account activity regularly, and report any issues to your financial institution. Make sure to keep your chequebook in a safe place, and never pre-fill or pre-sign cheques."

Remember, cancelling your PAD agreement doesn't cancel your contract for goods or services with the biller, or cancel the amount you owe. By cancelling your PAD agreement, you're simply indicating that you no longer wish to pay by PAD. You'll need to make arrangements with the biller to pay any amounts owing.

Tips for cheques

Although many people prefer the speed and convenience of electronic payments, Canadians still write close to a billion cheques each year.

A cheque is a written "order to pay", which you sign and give to another person or company as payment. When you pay by cheque, you are instructing your financial institution to give money from your account to the person (or organization) that is depositing the cheque.

Things to remember when paying by cheque

When filling out a cheque by hand, use a ball-point or roller pen with black or blue ink. If you're using a computer, use a minimum 10-point font and dark ink colours that will show up well in images (black, blue, or dark purple).

We recommend including the amount of the payment in words (even though it's not legally required), to serve as a backup if the amount in figures is questioned.  

Make sure you have sufficient funds in your account to cover the cheques you write. It's a good idea to keep a record of the cheques you write so you know which ones have been deposited and which ones are still outstanding.

Review your account activity regularly, and report any issues to your financial institution. Make sure to keep your chequebook in a safe place, and never pre-fill or pre-sign cheques.

What to do if someone cashes your post-dated cheque early

A post-dated cheque is a cheque that you write for a future payment. For example, many landlords ask for a year’s worth of post-dated cheques (one dated for the first of each month). The person you’re paying shouldn’t deposit your cheque before the date indicated on the cheque. Banks shouldn’t accept cheques before that date either, but since banks accept and automatically process a large number of cheques, some post-dated cheques may slip through.

If you notice that a post-dated cheque you wrote is cashed early, you can ask your financial institution to return the cheque, up to and including the day before the date on the cheque. The funds will be returned to your account. Remember, you’ll need to make other arrangements to pay the recipient.