When banking credit is good and bad: how to avoid transaction reversals and shortfalls
Did you know that Payments Canada statistics indicate that 99% of all deposits in a bank account are credits and not good funds?
The Canadian banking system works on trust and therefore provides an immediate credit that reflects the value of any funds being transferred or deposited. However, that credit needs to be processed and then settled. Banks do not provide notice when the funds are settled and can be used without risk of a reversal.
Crucially, using funds that have not been settled can lead to a reversal and a shortfall in your account – potentially leading to personal liability.
Cheques (certified or not), bank drafts, and other means of payment provide instant credit but not good funds, until they are verified and settled.
When funds have been deposited into your account, do not use or send out those funds until they have been verified to be settled! Bank employees cannot verify settlement. See our article on How to ensure you have secure funds