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Pre-Authorized Debits in Canada


Pre-authorized debits (PADs) are a convenient way to automatically pay bills and make payments. This blog will explain you more about pre-authorized debits.

Pre-authorized debit (PAD) transactions are popular in Canada. The number of PAD transactions per year is in tens of thousands. Most businesses use it to set up an automatic payment mechanism and take advantage of its simple and flexible features.

PAD is a simple and convenient way to pay bills and without being bothered much about payment due dates. Your lender can withdraw payments from your bank account whenever the amount is due.  It is an amazing technique if you are too busy to remember your payment due dates. PAD is a great tool to avoid penal charges because of late payments.

You can leverage PAD for all kinds of recurring payments including paying your mortgage, insurance premium, utility bills like electricity and water, etc. You can even transfer funds from your bank account to your Registered Retired Savings Plans (RRSPs) via PAD.

Why Use Pre-Authorized Debits?

Pre-authorized debit allows your beneficiaries to get the payment amount right from your bank account to their bank accounts on the due date. This feature comes in handy when you make recurring payments from your bank account.

The following are some examples of payments made using PAD:

  • Mortgage payments
  • Utility payments
  • RRSP contributions
  • Insurance premium payments
  • Credit card payments

Canceling a Pre-Authorized Debit Agreement

  • If you need to terminate the PAD arrangement, first, inform the biller and keep a record of the entire conversation. Usually, all agreements stipukate a procedure for canceling automatic payment setup.
  • Once you biller cancels the PAD arrangement and confirms, check your account statement to see if the PAD has stopped. If you notice the PAD amount is debited from your account, you have ninety days to request a refund from the financial institution.
  • Understand that canceling the PAD agreement differs from canceling your biller’s contract. You must continue to make the payment on each due date. Only the payment mode will change if you cancel the PAD.

Tips for Paying by Pre-Authorized Debit

When using a pre-authorized debit agreement, keep the following in mind:

  • Ensure you have read and understood all the terms and conditions related to PAD.
  • For your records, keep a copy of the agreement.
  • If you change the bank you had the PAD agreement with, you must notify the financial institution to stop debiting your account.
  • Check your bank statements to ensure the correct amount is getting deducted from your account as per the PAD contract.
  • Notify your bank of any discrepancy within 90 days (about three months) of their occurrence.

Payments made by electronic fund transfer (EFT) in Canada have hit a key benchmark. EFTs, which are the popular modes of money transfers, such as direct deposits, electronic bill payment, and pre-authorized debits, account for most transactions in Canada.   As a result, PADs have also become one of the most widely used payment modes today. We hope this article provides you with the requisite information you were looking for. You can find similar articles in the link given below.


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