A credit memorandum – more commonly called a credit memo – is a statement that indicates you’ve received store credit or a bank deposit after a transaction was completed. This can happen because you returned an item, you were originally overcharged, or an adjustment was made to your account.
A credit memo is similar to a store credit, and both you and the seller will receive a copy for your records.
Key Takeaways
- A credit memorandum (credit memo) either reduces how much you owe a business or gives you a credit toward a future purchase.
- You might get a credit memo if you return an item, you got a discount after a sale was completed, or the transaction was completed.
- Credit memos are commonly issued by small businesses.
- Credit memos are more like a store credit than a refund.
What is a credit memo and how is it used?
A credit memo is a financial statement that indicates you’re owed money by a business. They’re usually non-transferable, meaning they have to be used with the same business that issued them.
Credit memos can be used in three ways:
- You can use the credit memo to reduce the amount you owe on an invoice that has already been issued to you, but that you haven’t paid yet.
- You can use the credit memo as a credit toward a future bill or purchase with that same seller.
- In some cases, the credit memo can increase the balance of your bank account.
Why was I sent a credit memo?
There are a number of scenarios when you might get a credit memo, including:
- You returned something you bought.
- There was a billing or clerical item, like if you were overcharged for an item.
- You were given a discount or rebate after a sale was completed.
- The transaction was cancelled.
- You got a price adjustment because the item went on sale after you bought it.
- You own a business and the bank collected a payment for your account, you got a refund for a charge you previously paid, or you earned interest on an account.
Why do businesses issue credit memos?
Credit memos are a way for businesses to ensure accurate financial records. They help the business keep up with inventory and track price adjustments or other credits.
How is a credit memo different from a refund?
When you’re issued a refund, a credit is sent to your bank account or credit card. You can then use those funds however you’d like.
Credit memos are typically treated as store credit – unless it’s been credited to your bank account, you’ll need to use it with the same business that issued it. They’re not transferable and can’t usually be redeemed for cash.
You’re more likely to get a refund from a chain store or bigger business, but many small businesses in Canada use credit memos.
What information is included on a credit memo?
If you receive a credit memo, it will contain information about you and the seller, including:
- Your name and address
- The seller’s name and address
- Your bank account information
You’ll also see invoice details, including:
- The price, quantity, and description of the items you purchased
- Your original payment method
- The original invoice or purchase order (PO) number
- The reason the credit memo was issued
Who might send you a credit memo?
Credit memos are most commonly sent by businesses, but in some circumstances, you could also receive one from your bank, the CRA, or your student loan provider.
Credit memo from a business
When a business issues a credit memo, it typically acts as a store credit. This means you’ll need to use the credit memo with that company. If you don’t use the credit memo within a certain time period, some companies will eventually send the credit to your bank account as a refund.
Credit memo from a bank
Your bank might issue you a credit memo if your account balance is increased. This can happen because a transaction was reversed or because you earned a promotional balance, like a bonus for opening a new account.
Credit memos that are issued by a bank are sometimes called bank memos.
Credit memo from the CRA
The Canadian Revenue Agency (CRA) may issue you a credit memo if you overpaid on your taxes. They might also send a credit memo if your financial situation changes dramatically, like you file for unemployment, or in some cases when people file for bankruptcy.
Certain provincial credits or rebates may also appear as credit memos in your bank account, like the Ontario Trillium Benefit (OTB).
Credit memo from student loans
If you take out a student loan, you might qualify for a credit memo if you pay off more than what you owe. This can happen from direct overpayment, but it can also happen if you qualify for a federal or provincial grant
However, in most cases, you won’t automatically be sent the credit memo – you’ll need to apply for it by contacting Employment and Social Development Canada (ESDC).
What is a debit memo?
Debit memos are similar to credit memos, but debit memos mean you owe money to a company. You’ll need to pay a debit memo as soon as possible – you may not be able to make any further purchases with the company that issued it until the debt is resolved.
Why would I get a debit memo?
You might be issued a debit memo if:
- You were charged extra fees after a sale, like a late fee.
- You were provided with additional services after a transaction was completed.
- You were originally undercharged for an item.
- The terms of your contract changed.
- You were issued an account maintenance fee, NSF fee, or other bank charges.
FAQ
What is a credit memo from the bank?
Banks sometimes issue credit memos if a transaction was previously approved, then reversed. You might also get a credit memo from your bank if you qualify for a promotional balance or earn interest on an account. Credit memos issued by a bank are sometimes called bank memos.
How long do I have to use a credit memo?
Credit memos are usually good for 12 to 18 months – the details should be included in the details of the credit memo itself. After that time, the credit may be forfeited, although some businesses may return them to your bank account or credit card if you don’t use them.
Why did I get a CIBC credit memo?
If CIBC issued you a credit memo, you might have earned interest on your account or received a promotional balance. Your account could have also been credited due to a refund or price adjustment.
Why did I get a credit memo from RBC?
You might have received an RBC credit memo because you earned interest on your savings account, qualified for a promotional balance, or were reimbursed for certain bank fees. You might also have been issued a credit memo if you received a refund or were overcharged for a purchase.
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