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You overpaid your bill -- now what?

By Laura LaRocca and Kristen Frisa

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You pay your bills, then check your bank account and your credit card account the next day, only to realize you've made an error. You entered one zero too many, or you sent the payment to your emergency card, which doesn't have a balance.

It's an easy mistake to make, but undoing it might not be so simple.

"It's not like in the U.S.," where they have specific legislation, says Jonathan Bishop, former research and parliamentary affairs analyst with the Public Interest Advocacy Centre (PIAC). "Regulation in Canada is limited or non-existent." overpay-now-what

Instead, overpayment is handled on a case-by-case, institution-by-institution basis. Even within a bank, the procedures for resolving an overpayment may differ among the cards it offers.

However, most banks should offer similar solutions.

Your options if you overpay
Bishop says your first step is to look at your cardholder agreement, which may outline your choices, then contact the bank. You may have several options.

For instance, at Scotiabank, you have three choices, says Heather Armstrong, director of communications strategy and planning at Scotiabank.

Your first choice is to transfer the credit balance to another Scotiabank credit card, which you can do via call centre or by visiting a branch.

Or, you can keep the money on the account as a credit and use the card as normal, without making further payments until the credit is used. This is a good choice only if you use the card frequently, and if the overpaid amount doesn't leave you too much out of pocket.

Finally, you can visit a branch and request a cheque for the amount you overpaid.

At CIBC, you can have the overpaid amount transferred to your bank account via online banking, according to a CIBC customer service agent.

Alternatively, the customer "may request to transfer the credit balance to another account. There is no charge associated with the transfer of a credit balance to another account," CIBC said.

You may be able to withdraw the money from an ATM, but this could be the costliest option. First, you may face ATM fees. Then, the bank may treat the withdrawal as a credit card advance, leaving you with cash advance fee, as well as high interest charged on the amount from the date it's withdrawn.

Finally, don't be surprised if you have to pay to fix your mistake - some banks do charge fees.

"Although there aren't any regulations that the Financial Agency of Canada (FCAC) oversees that would apply in such instances ... a financial institution could charge a fee," Natasha Nystrom, media relations officer with the FCAC, said in an email.

Don't purposely overpay
There's no benefit to overpaying your balance. It won't improve your credit score, it won't increase your credit limit and it could get you in legal trouble.

"If a client wishes to increase the amount of credit available on their card, they may contact us at any time to discuss options," an RBC spokesperson said in a statement.

It's also not the best way to increase your spending power if, say, you're going on vacation and want to set aside extra money to spend. It's better to put the money in savings or even tuck away cash in an envelope.

You should be fine if you mistakenly overpay one time. However, if you do it too often, it could raise suspicion within your bank, especially if you choose to withdraw the money each time.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act requires banks to report suspicious transactions, which may include making a credit card overpayment and then requesting a cash advance, which is a sign of fraud.

See related: How to get a raise (on your credit limit), Be smart about automatic payments on your credit card

Updated: September 12, 2017