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Paying bills from a savings account
August 23, 2019
10:23 pm
Doug
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moneyhelp said

That sounds about right, because I opened my first savings account at 11 and I'm in my early 40s now, so although I never had a chequing account, I didn't have internet way back then to do EFT, or online bill payments or PAD, etc.

One question. The stop payment, you have to pay for it? Is that normal? I'm just thinking, if I wanted to cancel my GoodLife membership one day, and they keep billing me (because set up PAD) and I contact my bank (RBC), will they charge me to stop payments? I mean isn't that a normal service they provide their customers? I think its BS if they charge you? and for EVERY 6 months!!? What the f?  

Stop payments, where full details are provided (i.e., amount, date, name of payee - best to use exact name as it appears on your bank statement), generally cost about $10-15 and stay on for about 6 months; however, you can request that it stay on your account in perpetuity for no extra charge if you feel it's useful and necessary. I don't know about RBC, but some banks can't "stop all" payments like Scotia can so if the payee (gyms are bad for this; so is ICBC) changes the amount, it won't usually be returned. (Inadequate systems.) If the payment gets returned as NSF instead because you emptied your account, the bank or credit union can't correct the reason code. So, I recommend instead to letting the payment go through then go to your bank and request to do a pre-authorized debit return. State which item it is you wish to return, they'll print out and prepare a form and have you sign it, with you declaring the "reason" you'd like to return it. Within 2 business days, your funds will be returned to you. Pre-authorized debit returns are free, but you only have 90 days from the transaction posting date and you can't return funds transfer PADs (generally, PayPal, bank-to-bank transfers, etc.). 🙂

Cheers,
Doug

August 23, 2019
10:48 pm
Norman1
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I think a PAD incorrectly coded as a funds transfer pre-authorized debit can be disputed under section 23 of Payments Canada Rule H1 by claiming there was no required PAD agreement signed.

By definition, a "Funds Transfer PAD" requires that "the Payor and the Payee are the same individual" and that the debit is "for the purpose of transferring funds from their account at one [Payments Canada] Member to their account at another [Payments Canada] Member…".

I think the alarm company's financial institution would be in serious trouble for originating a funds transfer PAD when the payor and the payee are different.

August 24, 2019
3:32 am
Briguy
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When Grand Alarm kept taking monthly payments off my account even after I cancelled, this was back in 2007 mind you, Scotiabank didn't offer the free option of coming in and filling out a preauthorized debit return. But even if they had, @Doug, it sounds quite inconvenient to have to come in every month to the bank to fill out the form until you can get the originating company to stop withdrawing from your account. So I would really encourage people never to set up a preauthorized debit for your bill pay, as you are giving permanent access to your account, and the only sure way to remove that later is to close the account. I would pay bills preferably by interac e transfer or electronic bill pay using your bank's web page or by automatic withdrawal from a credit card.

August 24, 2019
7:45 am
Doug
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Norman1 said
I think a PAD incorrectly coded as a funds transfer pre-authorized debit can be disputed under section 23 of Payments Canada Rule H1 by claiming there was no required PAD agreement signed.

By definition, a "Funds Transfer PAD" requires that "the Payor and the Payee are the same individual" and that the debit is "for the purpose of transferring funds from their account at one [Payments Canada] Member to their account at another [Payments Canada] Member…".

For simplicity, I didn't mention that funds transfer PADs couldn't be disputed, but yes, it's possible. However, since "signatures" can be timestamped digital authorizations, no actual physical signature is required. Thus, it would be exceedingly rare to see a funds transfer PAD. 😉

I think the alarm company's financial institution would be in serious trouble for originating a funds transfer PAD when the payor and the payee are different.  

Happens all the time, Norman, with no repercussions. The financial institutions don't care and Payments Canada seemingly doesn't, either. Most that happens is the financial institution processes the pre-authorized debit return and client receives back their funds. Sometimes, the payee even has the gall to threaten legal action to the payor for returning a pre-authorized debit (i.e., incorrect amount, no or not enough pre-notification provided, etc.). On the latter, they can, but no judge in their right mind would award them damages because the opted to exercise the maximum required pre-notification of revocation requirement. 😉

Cheers,
Doug

August 24, 2019
9:14 am
Norman1
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Doug said

Happens all the time, Norman, with no repercussions. The financial institutions don't care and Payments Canada seemingly doesn't, either. Most that happens is the financial institution processes the pre-authorized debit return and client receives back their funds. …

It is good that financial institutions don't hold the victim payor to the no-reimbursement provision, in 21(a) of Rule H1, for a pre-authorized debit that was incorrectly coded as a "Funds Transfer PAD" instead of a "Personal PAD".

August 24, 2019
11:20 am
moneyhelp
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Doug said

If you're not obligated to pay a given amount, let it go through and do a pre-authorized debit return form. (I loved doing these at HSBC because it was so slick! 😉 )

Cheers,
Doug  

Are PAD return forms a standard that all banks follow, in the event of a mistaken PAD?

Coming from someone who has never had to do a PAD (that is for re-ocurring bills) I just want to know what my options would be in the event that a company (for example, GoodLife) keeps "inadvertently" debiting my account. Personally, and this is just common sense to me, but of course, I've never had to do this, so perhaps someone can better advise, I'd first contact the company I want to stop getting service from (ie. GoodLife, etc) and tell them to stop the PAD and then I would immediately contact my bank (or CU, etc) and ensure they understand to stop a PAD beginning a specific date. Wouldn't that be sufficient to 100% (assuming no one makes mistakes on either end) ensure not to be debited any funds?

Suggestions?

August 24, 2019
11:34 am
Norman1
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Payments Canada: Paying by Pre-Authorized Debit has consumer information about pre-authorized debits. The section "How to cancel a pre-authorized debit agreement" at the bottom of the page has details about cancelling a PAD agreement.

No need to notify one's bank or credit union of the cancellation. One's bank/credit union has nothing to do with the origination of the PAD transactions. PAD transactions are introduced into the clearing system through the biller's financial institution. Unless one wishes to set up a stop payment, any such notification will just go into a recycling bin.

Only contact one's bank/credit union to dispute a PAD once it is posted to one's account.

August 24, 2019
2:29 pm
Briguy
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Norman1 said
Payments Canada: Paying by Pre-Authorized Debit has consumer information about pre-authorized debits. The section "How to cancel a pre-authorized debit agreement" at the bottom of the page has details about cancelling a PAD agreement.

No need to notify one's bank or credit union of the cancellation. One's bank/credit union has nothing to do with the origination of the PAD transactions. PAD transactions are introduced into the clearing system through the biller's financial institution. Unless one wishes to set up a stop payment, any such notification will just go into a recycling bin.

Only contact one's bank/credit union to dispute a PAD once it is posted to one's account.  

So looks like nothing has changed since my experience in 2007. You can't contact your bank to let them know to cancel the preauthorized debit. You have to hope the company you gave the PAD to cancels it, if not you have to go to bank after they've taken out the money, within 90 days, and fill out the preauthorized debit return form each time.

I guess I'll continue with never using PAD unless absolutely necessary, and then opening a "burner" chequing or all-inclusive savings account meant for that specific PAD.

August 24, 2019
3:27 pm
Norman1
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PAD's work quite well. Most of them are legitimate.

So far, I haven't experienced a rogue PAD. If I do some day, I would wait at least five business days after the transaction posts so that any holds on the unauthorized pulled funds are released. That gives the payee an opportunity to withdraw the funds.

When I dispute the PAD and get my money back, the funds will be charged back to the payee's account. Maybe that would cause an NSF situation and the payee will be hit with charges for my returned PAD and NSF charges. sf-surprised

That should get the attention of the rogue payee's financial institution.

August 25, 2019
8:41 am
Norman1
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Honest mistakes can happen with pre-authorized debits. Not all billers are like some shady fitness clubs that continue to debit former member's bank accounts and credit cards for months after cancellation.

I mentioned earlier that the City of Toronto and City of London submitted their property tax pre-authorized debits twice in 2017 by accident. I think City of Ottawa had a similar incident years before then.

August 28, 2019
7:16 am
Peter
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I reached out to Alterna Bank to verify Doug's insistence that their coverdraft feature is "just a manual posting that they have to do to transfer funds from a savings account". According to their response, this is not true. This feature is automated:

"Coverdraft sweeps specifically are entirely automated, and done instantly by our system at the time of the transaction"

August 28, 2019
7:21 am
Doug
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Briguy said
When Grand Alarm kept taking monthly payments off my account even after I cancelled, this was back in 2007 mind you, Scotiabank didn't offer the free option of coming in and filling out a preauthorized debit return. But even if they had, @Doug, it sounds quite inconvenient to have to come in every month to the bank to fill out the form until you can get the originating company to stop withdrawing from your account. So I would really encourage people never to set up a preauthorized debit for your bill pay, as you are giving permanent access to your account, and the only sure way to remove that later is to close the account. I would pay bills preferably by interac e transfer or electronic bill pay using your bank's web page or by automatic withdrawal from a credit card.  

You usually only have to do a pre-authorized debit return form once, @Briguy. If that biller refuses, you would likely have a legitimate claim for a cause of legal action for their refusal to stop debiting your account, but yes, that's one of the risks with pre-authorized debits - FIs aren't obligated to ensure they're authorized to be debited from the account. On rare occasions, it becomes necessary to close down an account and open a new one, so be very cautious with who you give your bank account information to. I wouldn't give it to a gym for one thing.

Cheers,
Doug

August 28, 2019
7:24 am
Doug
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Peter said
I reached out to Alterna Bank to verify Doug's insistence that their coverdraft feature is "just a manual posting that they have to do to transfer funds from a savings account". According to their response, this is not true. This feature is automated:

"Coverdraft sweeps specifically are entirely automated, and done instantly by our system at the time of the transaction"  

Thanks, Peter, for doing that. It's good to clarify that their process is automated. It's confusing, though, since "coverdraft" at some credit unions is terminology used to refer to the manual paying of exception items that cause the account to be overdrawn (hence my assumption).

Cheers,
Doug

August 29, 2019
5:14 pm
Briguy
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Doug said

You usually only have to do a pre-authorized debit return form once, @Briguy. If that biller refuses, you would likely have a legitimate claim for a cause of legal action for their refusal to stop debiting your account, but yes, that's one of the risks with pre-authorized debits - FIs aren't obligated to ensure they're authorized to be debited from the account. On rare occasions, it becomes necessary to close down an account and open a new one, so be very cautious with who you give your bank account information to. I wouldn't give it to a gym for one thing.

Cheers,
Doug  

It still seems like a hassle, even if you have to fill out the PAD return form once. I like my idea of a "burner" account where you only have one PAD coming off it. I think if banks were more innovative they would automatically generate virtual bank account numbers for us to use for PADs the same way credit card companies like Capital One Eno in USA have made a virtual credit card, that we can set up to deal with a single contract. Royal Bank has something called Virtual Visa Debit, but that is a semi-permanent ( till expiry date on card ) virtual debit card that still allows the gym or alarm company etc. to take payments off even if you cancelled their service.

August 30, 2019
7:34 pm
Briguy
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@Doug Do you get a hard hit on your credit every time you open a chequing account, even if it's at same FI? I opened up my first chequing account ( US dollar ) at Meridian last week and even though I've been with them for a while they did a hard credit check with Equifax. If I opened a second one with them would they repeat the credit check? That would cause a serious problem with opening burner chequing accounts.

August 31, 2019
2:38 pm
Doug
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Briguy said
@Doug Do you get a hard hit on your credit every time you open a chequing account, even if it's at same FI? I opened up my first chequing account ( US dollar ) at Meridian last week and even though I've been with them for a while they did a hard credit check with Equifax. If I opened a second one with them would they repeat the credit check? That would cause a serious problem with opening burner chequing accounts.  

It depends on the FI, @Briguy, but generally, yes. Some FIs won't need to do a second credit bureau check if you've had one recently (varies, but 90 days is typically considered "recent"). Some FIs do hard enquiries for everything; some use a mix of hard and soft enquiries for chequing versus savings accounts. Supplementary savings accounts usually don't require a credit bureau check, though (hard or soft).

Your idea is a good one, but I'm not sure it's necessary. Just be careful who you give your bank account information to and, if it's a gym, give them only your credit card or go on a prepaid plan (if they offer it). Likewise, wireless telecom companies, I'd also favour going prepaid or using your credit card. That way, so long as you monitor your credit card statement regularly, you can dispute any charges and have them reversed in a somewhat easier fashion if you'd previously told the biller to delete your payment information.

Cheers,
Doug

August 31, 2019
5:38 pm
Briguy
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Thanks @Doug

September 15, 2019
3:51 pm
Adam1
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Hey everyone, first time posting here. I'd like to add to the discussion how I maximize interest earned in savings while paying bills from chequing and not needing to worry about any NSF charges. I keep all of my cash savings at Motive with their current 2.8% rate. For my bills I have automatic payments set up for pre-authorized debit from my Tangerine chequing account. Tangerine has optional overdraft protection available, which charges a $5 fee and 19% annual interest, but if you go into overdraft at any time and clear the negative by 9pm PST on the same day, the $5 fee and interest is waived. This allows me to keep my chequing balance with Tangerine at $0, and only add enough money to the account when I receive the alert that my account has gone into overdraft. Other than pre-authorized debits, it would also work for ATM withdrawals, cheque withdrawals, internal transfers from chequing, and manual bill payments.

Adam

September 16, 2019
4:29 am
Briguy
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Adam1 said
Hey everyone, first time posting here. I'd like to add to the discussion how I maximize interest earned in savings while paying bills from chequing and not needing to worry about any NSF charges. I keep all of my cash savings at Motive with their current 2.8% rate. For my bills I have automatic payments set up for pre-authorized debit from my Tangerine chequing account. Tangerine has optional overdraft protection available, which charges a $5 fee and 19% annual interest, but if you go into overdraft at any time and clear the negative by 9pm PST on the same day, the $5 fee and interest is waived. This allows me to keep my chequing balance with Tangerine at $0, and only add enough money to the account when I receive the alert that my account has gone into overdraft. Other than pre-authorized debits, it would also work for ATM withdrawals, cheque withdrawals, internal transfers from chequing, and manual bill payments.  

That's a good setup, but if you were prepared to sacrifice 0.5% interest you could do it all with one bank- Alterna bank with their 2.3% HISA and free coverdraft for their chequing account from their savings acount. I personally don't like PAD from a savings account as I previously posted as there's nothing to stop that company from taking money out of your bank account once you've given them access. Others here seem to trust PAD besides me except for shady fitness clubs 🙂
I only do PAD from a credit card.

September 16, 2019
11:15 am
Loonie
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I don't understand how Adam reliably gets the money into Tangerine to cover his overdraft by 9pm same day if it's all at Motive. The penalty is too high for me to take that risk.

Never join a fitness club and you'll never have to worry about unauthorized withdrawals. If you want to get fit, get moving! You were born with the necessary equipment.
As the nice fellow at ING used to say, "save your money".sf-smile

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