What is a Bank Draft? 13 Facts You Need To Know

A bank draft is a payment made in the name of the payer and guaranteed by the issuing bank. A draft is utilized when the payee requires a highly secure payment method. The article that follows will provide the most precise information on it.

What is a Bank Draft?

A bank draft is a quick and safe way to make significant payments without withdrawing cash from one’s account. Individuals can send payments to third parties via bank drafts, which are insured by financial institutions.

In the majority of instances, bank drafts can be utilized to make payments in the majority of currencies. The recipient can deposit the bank draft at any bank, just as they would cash. The majority of financial institutions do not expire their bank drafts.

What is a Bank Draft?

However, certain financial institutions may reject bank drafts older than a few months. Bank drafts are often referred to as bank checks and bankers’ drafts.

How Does It Work?

The person making the payment must first make a request to their financial institution for a bank draft. Once the request has been filed, the bank checks the individual’s account to determine if sufficient money are available for transfer.

If the individual’s account has sufficient funds, the bank authorizes the request, debits the individual’s account, and provides a bank draft for the same amount. Until the draft is submitted for payment by the beneficiary, the money withdrawn from the individual’s account are typically deposited into the bank’s reserve account.

Typically, bank drafts include a minor cost. Nevertheless, the majority of bank accounts give a fixed amount of free bank drafts every year.

The bank draft is a document issued in the name of the person who will deposit and receive the funds. The purchaser is responsible for delivering the bank draft to the payee.

When the payee produces the bank draft for payment, his or her identification is confirmed against the name on the bank draft. The money are put into the payee’s account following identification verification. The processing of the money might take anywhere from one to four business days.

Can a Bank Draft be Canceled?

Since the money have already been moved from the buyer’s account to the bank’s reserve account, it is impossible to cancel a bank draft. If the bank can verify that the bank draft has not been cashed by the payee, it may agree to cancel the bank draft and credit the buyer’s account.

What is a Bank Draft?

If the bank draft is lost or stolen prior to being handed to the payee, the buyer can obtain a new draft from their bank and cancel the current one. Similarly, if the transaction is terminated for whatever reason, the buyer may request the bank to revoke the draft, unless the payee has already cashed it.

What are the Advantages of a Bank Draft?

1. Guaranteed availability of funds

The bank guarantees a bank draft, unlike a personal check. It signifies that the recipient is certain of receiving payments. In this regard, bank drafts are safer than personal cheques, which may bounce if the payer’s account is insufficiently funded.

2. More convenient

Transferring a significant quantity of money by bank draft is considerably simpler and more convenient than withdrawing a large sum of cash. In contrast to an e-transfer, a bank draft has no maximum amount limit and does not require the payee’s banking details.

Thus, bank drafts are frequently utilized when making major expenditures, such as the purchase of a home or automobile.

3. Can be used for cross-border purchases and investments

In addition to providing cash in various currencies, bank drafts are frequently utilized for international transactions and investments.

What are the Disadvantages of a Bank Draft?

1. Cannot be canceled after delivery

Once a bank draft has been given to the payee, it cannot be canceled since it represents a completed transaction.

2. Subject to fraud

If a bank draft is lost, stolen, or changed and the incorrect person cashes it, the bank is not liable for restoring the lost monies. In such instances, the purchaser might lose a substantial amount of money, especially considering that bank drafts are typically utilized for larger transactions.

Special Considerations

Some banks may not be able to withhold payment on issued checks. According to their records, the transaction has already been completed. Typically, if the buyer chooses to reverse the deal, they must redeem the draft for the whole amount.

If the customer has the proper documents, it is possible to cancel or replace a lost, stolen, or destroyed draft in certain instances.

What is a Bank Draft?

Bank Drafts vs. Money Orders

Both a bank draft and a money order have a predetermined amount printed on the document. Each is regarded as a secure third-party payment mechanism. With a bank draft or money order, the payer is not need to carry huge sums of cash.

However, a bank draft is a check written on a bank’s funds after the bank accepts the amount from the issuer’s account, but a money order is purchased with cash.

Bank drafts can only be acquired from banks, although money orders can be obtained from certified retailers, post offices, and banks.

A money order may be issued by an authorized entity, such as a certified shop, post office, or bank, but only a bank may issue a bank draft. Many nations limit the amount of money that may be exchanged into a money order since money orders are frequently used for money laundering.

The amount of a bank draft can be significantly greater. Due to the restricted quantities printed on money orders and the procedure banks use to issue drafts, money orders are less expensive than bank drafts.

Acquiring a bank draft is more challenging than obtaining a money order since the payer must go to their bank to acquire the draft, as opposed to utilizing one of the more accessible organizations that offer money orders.

Types Of Bank Drafts

When safety is crucial, a classic bank draft is a beneficial instrument.

Large amounts: For transactions involving large amounts of money, the ramifications of a returned or bounced check are severe. Sending pricey items or concluding a transaction when payment is uncertain is dangerous. A legal bank draft is a guaranteed type of payment that greatly improves the payment’s likelihood of success.

Available funds: It may take several business days for personal and company checks to clear the banking system and post to an account. Receiving a check does not guarantee receipt of money or instant access to those funds.

What is a Bank Draft?

The fact that the consumer has already “paid” enables banks to guarantee bank drafts. Generally, bank drafts are accessible for use in the recipient’s account within one business day, and it is unusual that the bank will reverse the deposit a few days or weeks later. As a result, bank drafts are common for transactions such as international commerce and house purchases.

The phrase “cashier’s check” is occasionally used in place of “bank draft,” particularly in the United States. Cashier’s checks and bank drafts are comparable.

After receiving funds from the drawer, a bank prints and guarantees a check (the person who wants to make a payment). The fact that the consumer has already “paid” allows banks to guarantee bank drafts.

Compare to Standard Checks

To comprehend the characteristics of a bank draft, it may be instructive to compare it to personal and company cheques.

When a person or business writes a check, it is not necessary for them to have sufficient funds in their account. Anyone can write a check for any amount, and the recipient has no way of knowing whether the check will be honored or not.

There are sanctions for passing improper checks, yet checks frequently bounce. It’s easy to forget about other transactions that pull funds from an account, and it’s not always a deliberate attempt to cheat.

Immediately upon issuing a bank draft, the bank will frequently transfer cash from the payor’s account to its own. In other words, a person or organization paying using a bank draft is unable to get a bank draft unless it has the necessary cash.

Because the bank has already deducted the funds from their account, it is impossible for them to use the money before you deposit the bank draft.

Rather of depending on every individual who writes a check, you may rely on the bank to guarantee the payment. Banks likely have substantial assets and stringent procedures in place to honor checks. You may not get payment if the bank goes out of business, although this risk is minimal.

Are Bank Draft Payments Safe?

If someone pays you using a bank draft, you cannot always expect to get the funds. Cons often use counterfeit cashier’s checks to defraud their victims.

Before you spend the money or sell something of value, you should always confirm with your bank to ensure the check is valid. Before turning over products or depositing a bank draft, you can go one step further and check funds with the issuing bank.

Be extremely aware of anyone who overpays and then wants you to transfer money back; this is a huge warning sign that you’re dealing with a thief.

What is a Bank Draft?

Treat a bank draft like you would any other check when depositing or cashing it. Take the paperwork to your bank or credit union and get the reverse of the document stamped.

If you make your deposit with a bank employee, your bank may credit the cash to your account more rapidly than if you use an ATM or mobile device. Additionally, you may be able to get extra (or the full amount) in cash instantly.

How to Get a Bank Draft

Ask your bank or credit union to provide you with a bank draft. In the United States, a “cashier’s check” is commonly used, although in other countries the phrase “bank draft” is used. You may also request drafts online.

If you already have an account with a bank, you have the best chance: Numerous institutions solely provide this service to their consumers.

Out and about? If you are away from home or don’t have a bank account, you can inquire at a different bank office. Expect to pay the full amount of the check (plus any applicable fees) with cash or a cash advance from your debit card.

You may substitute a bank draft with a money order, which should be widely accessible at food and convenience stores. However, money orders may not be an appropriate form of payment; inquire first.

Credit union members: You may be able to obtain an official check from the branch of another credit union if you utilize a credit union (while accessing your account at your home credit union). Participating in shared branching are thousands of credit union sites. Expect to pay a little charge (checks above $1,000 may incur greater costs).

Automatic Payments

Bank draft can also refer to electronic payments processed automatically. These payments let companies and service providers to withdraw monies straight from a client’s checking account.

What is a Bank Draft?

Instead of writing a check or paying with a debit or credit card, clients supply the business with their bank account information (particularly, their account and routing numbers) to set up draft payments.

These transfers often occur via the Automated Clearing House (ACH) network and make it simple for consumers to make regular (or one-time) payments.

Customers benefit from not having to write cheques or enter payment card information each month. Businesses also benefit since they do not have to deposit checks, wait for money to clear, or pay credit card processing costs.

By opening a merchant account or working with a payment processor that takes ACH payments, businesses can begin accepting bank drafts as payment. These payments are often cheaper for retailers than credit card payments (as low as a few cents per transaction) and less susceptible to chargebacks.

Frequently Asked Questions (FAQs)

It’s a paper document that looks a lot like a regular cheque. The main difference is that someone who receives a bank draft has a guarantee that the funds are available, as opposed to a regular cheque, which could bounce. Bank drafts are made out to the person receiving the money.
Unlike a personal check, a bank draft is guaranteed by the bank. It means that the payee is guaranteed the availability of funds. In such a way, bank drafts are safer than personal checks, which might bounce if there are no sufficient funds in the payer’s account.

How do you stop an automatic bank draft?

The term bank draft is frequently used in a variety of settings, and its meaning varies from country to country. Electronic bill payments that move funds directly from a bank account to a service provider (such as an electric utility provider or an online store) are also known as drafts.

What is a bank draft in convertible currency?

A convertible bank draft can be converted to a currency other than the recipient’s home currency. This makes them beneficial for those who need to utilize bank drafts overseas.

What is a Bank Draft?


A bank draft is a cheque drawn on the funds of a bank and guaranteed by the bank that issues it. When receiving significant payments, a bank draft is similar to a cashier’s check in that it is safer than a personal check.

A bank customer must have cash on hand in order to obtain a banker’s draft. The bank will either freeze the required amount or transfer the cash into the bank’s accounts to cover the payment.

The phrase bank draft is often used in various contexts, and its usage differs by nation. For instance, electronic bill payments that transfer cash directly from a bank account to a service provider (such as an electric utility provider or an online retailer) are also referred to as drafts.


A bank draft is a negotiable instrument where payment is guaranteed by the issuing bank. Banks verify and withdraw funds from the requester’s account and deposit them into an internal account to cover the amount of the draft. A seller may require a bank draft when they have no relationship with the buyer.
It’s a paper document that looks a lot like a regular cheque. The main difference is that someone who receives a bank draft has a guarantee that the funds are available, as opposed to a regular cheque, which could bounce. Bank drafts are made out to the person receiving the money.
Guaranteed availability of funds

Unlike a personal check, a bank draft is guaranteed by the bank. It means that the payee is guaranteed the availability of funds. In such a way, bank drafts are safer than personal checks, which might bounce if there are no sufficient funds in the payer’s account.

Similar to a cashier’s check, a legitimate bank draft is safer than a personal check when accepting large payments. To get a banker’s draft, a bank customer must have funds (or cash) available. The bank will freeze the amount needed or move those funds into the bank’s accounts to complete the payment.
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