What is a ‘Bank Draft’ ?
A bank draft is a check drawn on a bank’s funds, similar to a cashier’s check. The funds might be held in the same bank that creates the draft, or the money behind the draft might be held in the bank’s account held at a different bank.
The term bank draft is used for other situations, and use varies from country to country.
Basic Bank Drafts
A traditional bank draft is a payment used when safety is important. If you need to pay somebody with guaranteed funds, you might use a bank draft. For large transactions and situations where a seller does not want to wait for a check to move through the banking system, a bank draft gets money moved quickly.
Bank drafts are often used for international trade or purchasing a home.
The term “cashier’s check” is sometimes used instead of bank draft, especially in the USA.
Security: bank drafts are a secure form of payment. When you receive a bank draft (and it’s authentic – which isn’t always the case), you can be confident that the payment is good. The funds will generally be available in your account within one business day, and it’s unlikely that your bank will reverse the deposit a few days or weeks later.
To understand the security of a bank draft, consider a standard personal check. When somebody writes a check, they don’t necessarily need the money available in their account – they can write a check for whatever they want, and the recipient does not know if the check will bounce or not. Of course, there are consequences for passing bad checks, but it happens. What’s more, sometimes honest mistakes prevent checks from going through.
With a bank draft, the funds are moved into the bank’s accounts once the draft is issued. In other words, the person or organization paying with a bank draft can’t even get a bank draft unless they have the funds required, and they can’t spend that money before you deposit the bank draft because the bank already took the money out of their account.
Instead of relying on somebody to write a check, you’re relying on a bank (which presumably has significant assets and strict procedures in place) to back up the payment. If the bank goes out of business, you won’t get paid, but your risk is fairly small.
Are Bank Draft Payments Safe?
If somebody pays you with a bank draft, you can’t always assume you’ll get the money. Scams regularly use fake cashier’s checks to swindle victims. You may assume you’re getting paid with ‘cleared’ funds, but you should always check with your bank and verify that the check is legitimate before you spend the money.
You can even go a step further and verify funds with the issuing back before handing over merchandise or depositing a bank draft.
To deposit or cash a bank draft, treat it as if it was any other check. Your bank will credit the funds to your account more quickly, and you might be able to get more (or all) of the amount in cash immediately.
How to Get One
How can you get a bank draft? Ask your bank (again, in the US you’ll generally want a “cashier’s check” but other countries use the term “bank draft”). You can walk in and get one from a teller, or you might be able to request one online. Your chances are best if you go through a bank that you currently have an account with – some banks only provide this service to customers.
If you’re away from home or you don’t have a bank account, you can always try walking into a branch and asking. You’ll need to pay the full amount of the check (plus fees) with cash or a debit card. Alternatively, you can try using a money order, which is similar but less secure.
Be sure to bring ID with you, and expect to pay a modest fee.
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