Canadian Pre-Authorized Debit (PAD)

How a pre-authorized debit moves through Stripe

A PAD payment created before the 17:00 US Eastern cutoff on a business day is submitted the same day. Anything created later, or on a weekend or holiday, is submitted the next business day. From submission, Stripe’s standard settlement marks the payment successful at T+4, at 21:00 UTC, and makes the funds available in the Stripe balance at T+5, at 00:00 UTC.

The four business days of processing are where month ends get awkward. A run submitted on the last Monday of October can succeed on the Friday and be available the following Monday, in November. Submit it one business day later and both the success and the funds move into the next month. Stripe also exposes an expected_debit_date on the charge, which is an estimate of when the customer’s account is debited and can differ from the actual date.

For subscriptions, the payment method is saved for invoices and subscriptions, so one mandate covers every billing period. Stripe Checkout supports PADs in payment and setup modes but not in subscription mode, so recurring PAD billing runs through Stripe Billing or Invoicing.

PAD agreements: schedule, transaction type and notifications

In Canada a mandate is called a PAD agreement, and Payments Canada Rule H1 governs how it is collected, confirmed and notified. Each agreement records the customer’s institution number, transit number, account number, name and email, and two choices that matter later.

The first is the payment schedule. An interval agreement allows debits on a stated schedule or on clearly described triggers, such as on the 5th of every month or when an invoice becomes due. A sporadic agreement allows debits only when the customer expressly authorizes each one at the time. A combined agreement allows both.

The second is the transaction type, personal or business. It is easy to treat as a form field, but it sets the dispute window for every payment under that agreement.

Payments Canada rules require a mandate confirmation when the agreement is set up and a debit notification each time you debit the account. Stripe sends both by default. A customer can cancel the agreement at any time, including by telling your business orally or by contacting their bank, and a cancelled agreement invalidates every future debit until you collect a new one. The Stripe mandate glossary entry covers the object Stripe uses to track this.

Failures, disputes and refunds

A failure happens before the payment is final. Stripe lists insufficient funds, an invalid account number and a customer disabling debits with their bank as typical reasons, and if a payment fails after its funds were made available, Stripe removes them from the balance immediately. With Stripe Billing’s Direct Debit retries switched on, Stripe retries an insufficient-funds failure once, within 30 days of the original attempt, and does not charge a failure fee for that automatic retry.

A dispute happens after the payment succeeds, through the customer’s bank, on a no-questions-asked basis. Personal-account disputes can be filed up to 90 calendar days after the debit and business-account disputes up to 10 business days after it. Stripe deducts the amount and the dispute fee when the dispute is created, you cannot submit evidence, and the fee is not refunded. A PAD payment can be disputed only once. If the customer later agrees to pay, they make a new payment.

A refund is your choice, for up to 180 days after the payment. Stripe sends it as a separate credit that references the original statement descriptor rather than saying refund, it takes about 3 business days, and it cannot be cancelled once submitted. Because a refund does not prevent a dispute, a customer who also calls their bank can be credited twice. Stripe’s advice is to tell the customer you are refunding, tell them how long it takes, and refund only after the original payment has fully settled.

What it costs

Stripe’s Canadian pricing page lists pre-authorized debits at 1% + CA$0.40 per successful payment, capped at CA$5.00, plus CA$5.00 for each failed payment, CA$5.00 for each disputed payment and CA$1.00 for each instant bank verification.

The cap takes over at CA$460, because 1% of CA$460 plus CA$0.40 is exactly CA$5.00. Every larger payment costs the same CA$5.00, so a CA$1,450 monthly retainer costs CA$5.00 to collect and a CA$49 subscription costs CA$0.89.

The failure and dispute fees are costs with no sale attached. A ledger that tracks only sales and processing fees drifts from the Stripe balance by CA$5.00 every time a debit bounces or a customer disputes, so those fees need a line of their own.