bank draft

Banking Terms -> bank draft

• A bank draft refers to a kind of check whereby the issuing bank guarantees the payment. Banking institutions normally review requesters’ accounts to check if funds are sufficient for the check to clear. Upon confirmation that money is sufficient, the bank will set aside money from the account of the person as to give out. A bank draft normally involves transactions with considerable amounts of money and cases in which trust can be an issue.
  
  The term bank draft is more commonly used in Great Britain and Canada. It is better known as cashier’s check in the United States. Bank drafts are issued by banking institutions as an alternative to checks. People sometimes issue checks even when they don’t have enough money for a check to clear. With bank drafts, the full amount is paid, along with a small service charge, before the check clears. The bank will then issue a draft to the party involved.
  
  The main benefit of bank drafts is namely the fact that the whole amount is paid in full, ensuring credibility and the check’s clearance. The bank draft may be compromised only because of forged draft. Bank drafts can be used for a variety of purposes, for example purchasing services in commercial or corporate settings. The majority of commercial enterprises actually prefer bank drafts to checks. At the same time, financial institutions can issue bank drafts even in case customers don’t have an account.
  
  Bank drafts are the preferred payment method if guaranteed funds are required to pay someone. If you are buying a house, for instance, you may have to use this form of payment rather than a personal check. Bank drafts are often used in international trade as well.
  
  The bank draft is also known as a demand draft, bank check, treasurer’s check, and teller’s check. Being treated as guaranteed funds, bank drafts clear on the next working day. The client can request next-day availability because many banking institutions will not have the check cleared immediately. Banks are allowed to take funds back 1 to 2 weeks later if it is found out that the check is fraudulent.
  
  Legitimate bank drafts display the issuing bank’s name on a visible place which is typically the upper center or upper left-hand corner of the check. Bank drafts also come with other security features, such as special bond paper, watermarks, color-shifting ink, and security thread. All these aim to limit the risk of receiving fraudulent checks. The front of the check should contain words in a visible place so that the bank draft is recognized as such. The front should also contain the name of the payee, the remitter’s details, the numeric and written amount, which has to be tendered, the branch of issue, and other tracking information. One or two officers or employees of the bank sign the check, but some banking institutions issue bank drafts with a facsimile signature of a senior bank official such as the chief executive officer.
  
  Some people prefer to pay for purchases with cash, but this is not the best of ideas in all cases. With bank drafts, you obtain a record of the transaction, which is not always the case with cash. Drafts are typically made out to persons to whom you make a payment, and this will be recorded as well. You can prove that you have withdrawn cash from your bank account, but you cannot always prove that you gave it to another person. It doesn’t cost much to have a bank draft issued – typically several dollars per one hundred. This cost is reasonable given the greater security.

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