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Bank Drafts

What is a Bank Draft?


A bank draft is traditionally a check drawn on a bank’s funds, such as a cashier’s check. When paying bills, the term bank draft is sometimes used to refer to an automatic transfer from your bank account to your service provider.

Basic Bank Drafts

You generally use bank drafts when you need to pay somebody with guaranteed funds. When purchasing a home, for example, you may be required to use a bank draft instead of a personal check. They are also used in international trade.

The term 'cashier’s check' is sometimes used instead of bank draft.

Bank drafts are more secure for sellers because the funds are guaranteed by the bank that issued the draft. If you write a personal check, your check may bounce. However, banks only issue bank drafts after they’ve taken money from your account - so sellers have a better chance of getting paid.

Are Bank Draft Payments Safe?

If somebody pays you with a bank draft, you can’t always assume you’ll get the money. Plenty of scams 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. Be especially wary of anybody who overpays and asks you to send money back.

Automatic Payments

Some businesses refer to automatic payment plans as 'bank draft' programs. Instead writing a check to pay the bill each month, you provide bank information to your service provider. They transfer (or draft) money from your account electronically via the ACH system. You don't have to spend time paying bills and they don't have to deposit your payments and wait for your check to clear.

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