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 might or might not bounce. Bank drafts, on the other hand, won't bounce unless the bank goes belly-up (assuming the draft is a legitimate document - see below). Banks only issue bank drafts after they’ve taken money from your account or you've handed over cash - 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. It's not a bad idea to verify funds with the issuing back before handing over merchandise. Be especially wary of anybody who overpays and asks you to send money back.
- See How Cashier’s Check Fraud Works
- Find out How Long to Wait After Depositing a Check before you spend the money
How to Get One
How can you get a bank draft? Ask your bank (note that in the US you'll want a "cashier's check" but other countries use the term "bank draft"). You can walk in and work with 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. However, if you're away from home or you don't have a bank account, you can always try walking in and asking (or you could try a money order, which is similar but less secure).
Be sure to bring ID with you, and expect to pay a modest fee.
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.