What Is A Credit Memo In Canada 2023? Is It Good or Bad

Have you ever returned a product that you bought from a business in Canada?

You might have received something called a credit memo after completing the return.

If you are a business owner, you might have seen a credit memo on your bank statements.

If you don’t know what a credit card memo is in Canada and why you got one, you are not alone. A lot of readers have asked me what it is, and I felt that more people might be wondering about it as well.

In this post, I will give you an overview of what is a credit memo in Canada so that you can understand exactly why you might have received one.

Credit Memo In Canada

What Exactly Is A Credit Memo?

A credit memo is something that business owners might find in their bank statements from time to time.

If you are a customer who has returned something to a business, you might receive a credit memo as a physical copy.

Have you received a credit memo, and you are not sure why you have it? It is most likely because you have returned something to a business. Sellers often send credit memos to their customers when their customers return a product.

Not all Canadian sellers send credit memos to their customers who return items. A credit memo is essentially sent by businesses that prefer to offer their buyers a store credit instead of refunding the money.

If you have received a credit memo from a business that you have returned an item, you can use the credit to lower the cost of another product or eliminate the cost altogether.

Whether you reduce the cost or eliminate it depends on the price of the product returned and the product you want to purchase from the seller instead.

Suppose you are a business owner or seller and you have found a credit memo in your bank statement. In that case, it is the bank returning money for either interest earned on your deposit in the checking account or a refund from a previous bank charge.

Is A Credit Memo A Refund?

Credit Memo In Canada Infographics

Many people who have received a credit memo often wonder what the difference between a credit memo and a refund is. At first glance, a credit memo and a refund might sound like they are the same thing. For a customer, both cases see them receive something from the seller.

However, when you get a refund, the seller simply pays you back the money. In case you receive a credit memo, the seller does not return you any money. Instead, you get credit towards your next purchase.

Suppose that you bought something from a major chain store that generally offers refunds for its products. If you return a product to them, you will have to simply sign off, and the store will return the money to you.

But not all businesses have a refund policy. In many cases, smaller businesses prefer to offer credits instead of returning the money.

If you bought a product from a business that offers credit rather than refunds, you will not receive any money back from the business after you return an item to them. The business will offer you credit on your account so that the next time you shop with the business, the money will automatically be deducted from your total bill.

If you are a business owner, the most common scenarios in which you could see a credit memo in Canada include:

  • The bank is adding the interest earned for having money in your account,
  • The bank collected a note for the business, or
  • The bank is providing a refund of a prior bank charge.

What Is A Debit Memo Charge?

Credit memos are not the only thing you can expect to see. You might have also come across a debit memo charge from your seller. Think of debit memos as the opposite of credit memos.

A credit memo reduces the amount of money that a customer owes during their next purchase with the seller. A debit memo increases the amount that a customer owes the seller the next time they shop at the business.

The most common reason a debit memo can be applied to an account is when a business does not charge the amount it was supposed to during the original transaction.

If a business makes the mistake of undercharging an account, the customer might owe extra money. Customers can pay off the amount directly or through a debit memo on their next purchase.

If you are a business owner, you can expect to see a debit memo in your bank statement in a few scenarios, including:

  • A bank service charge for maintaining your checking account,
  • Subtracting the amount for a customer’s check that did not clear the customer’s bank account,
  • A bank fee for handling a check that was returned for insufficient funds, or
  • A monthly loan payment.

What Information Is Found On A Credit Memo?

Businesses that use credit memos often use them to keep track of their inventory. It means that the credit memo is supposed to contain a substantial amount of useful information regarding the transaction.

Most credit memos contain information like the purchase order number and the terms of payment and billing. Other significant data that can be found on a credit memo includes the shipping address, a list of items, prices, date of purchase, and quantities.

The documentation of all this information is also a reason businesses might issue credit memos to their customers who return products.


In conclusion, a credit memo is not something to worry about as a customer or as a business owner.

A credit memo is designed to provide buyers with compensation for products they have returned in the form of shopping credit with the seller. Business owners who issue credit memos to customers who return products should take this into account while filing their taxes.

As a business owner, a credit memo could be there in your bank statement because the financial institution is adding money due to interest earned on your deposit in the checking account, a refund for a prior charge, or adding funds to your account because the bank handled a note intended for the business to receive.

Learn more about the best banks in Canada here.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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