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What is a Bank Draft?

The truest definition of a Bank Draft is a check written with the certification of a customer’s bank.

Bank Drafts are checks also known as Bank Checks and Cashier’s Checks. They have already been cleared at the writing institution and they provide an extra endorsement that the payment is good. Regular personal checks do not need to be co-signed or verified before they are used as payment, whether or not there is enough money in an account to cover it.

For large purchases, some businesses require Bank Drafts to reduce their risk exposure. Bank Draft checks may come with watermarks or holograms. In any case it is important to try to verify the authenticity of one before it is accepted as payment.

They normally clear much faster than personal checks, which could mean instantaneously or the next business day. Electronic payments are also sometimes called drafts or automatic drafts.

What is Counter-Party Risk?
What is a Bank Guarantee?

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