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What is a bank draft?

What is a bank draft?

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A bank draft is a useful payment tool often used when safety is an issue.  For instance, when the seller has no prior relationship with the buyer, they may prefer a bank draft as a payment option if they believe that getting payment may be difficult.

Similarly, when the transaction involves large amounts of money, the buyer may decide to pay with a bank draft for safety reasons.

But what is the correct bank draft definition?

What Is a Bank Draft?

The definition of a bank draft is not to be confused with a backdraft definition. A bank draft is a payment instrument guaranteed by the issuing bank.

A bank draft is a secure and convenient payment option as it enables you, the payer, to make large payments without the need to withdraw cash from your account. The amount of the draft is drawn from your account.  So, you must have sufficient funds to cater for the bank draft and the bank fees.

How a Bank Draft Works

In this section, we try to answer what is drafting in the banker’s draft scenario.

Bank drafts are also called banker’s drafts, teller’s checks, or bank checks. If the payer needs a bank check drafted by their bank, they just request the bank.

A bank employee will check if you have enough funds to cater for the requested teller’s check and the transaction fee. Once they verify your account has enough funds, they will withdraw the funds from your account and transfer them to the bank’s internal account. This makes a bank draft reliable as the bank will already have set aside the money to make the payment.  

The bank will then write the bank draft in the payee’s name-the person receiving the money. Your name as the drawer and the amount will also be included.

The drawer of the banker’s draft is responsible for ensuring that the payee gets the draft. Once the payee gets it, they can present it to their bank for payment. The bank will have to verify the payee’s identity, and after the verification process, the bank will deposit the money in their account.  The money will be available for spending within 1-4 business days.

When coming up with the drafted definition, we must keep in mind that the bank draft’s greatest distinguisher as a payment option is that it is backed or guaranteed by the bank.

Parts of a Bank Draft

The bank draft has negotiable and non-negotiable parts. The former is the part you give to the payee.

The non-negotiable part has information relating to the transaction. You should always keep this part safe as it’s your only proof of the transaction if the bank draft is stolen or lost.

Other parts of a bank draft include:

  • A serial number used to verify the payee identity
  • Watermarks and micro encodings that help identify the draft as a payment instrument

Can a bank draft be reversed or canceled?

It’s unlikely for a financial institution to reverse a teller’s check deposit already made to a payee’s account.  This is because, on the bank’s books, the transaction has already taken place.

But in some rare cases, if the payee has not yet cashed the money, the bank may agree to cancel the draft and refund the money in the drawer’s account.

In case you lose a bank draft before delivering it to the payee, you can always visit your bank to have it canceled. If you have the non-negotiable part of the draft, present it to the bank for verification. The bank will issue you with a new draft, which you can deliver to the payee.

Advantages of a bank draft

There are many reasons why a buyer or a seller may prefer a bank draft to cashier checks or any other form of payment.

Some of these reasons include:

Guaranteed funds

A bank draft is a reliable form of payment as the bank guarantees it. The payee is sure that the funds are available as the bank must confirm that the drawer has enough funds in their account. Unlike a personal check, a bank draft will not bounce due to insufficient funds in the payer’s account.

Besides, it’s hard for a banker’s draft to be canceled once the money is already deposited in the bank’s internal account.

Convenient for large payments

A bank draft doesn’t have a limit to the amounts of money you can transact. This is why it’s preferred when one needs to make high-dollar purchases such as buying a car, a home, or when making cross-border payments.  

In such transactions, you don’t have to carry large sums of money that can jeopardize your safety. A bank draft is a more convenient and safer way to transfer large amounts of money to a seller.

Get your money quickly

Once presented to the payee’s bank, a bank draft take one to four business days to clear. On the other hand, personal and business checks can take weeks, and they sometimes bounce due to various reasons.

As a business, a bounced check can cost you a lot.  But with a bank draft, you’ll not have to worry about such risks.


Banks have strict procedures to ensure the payer has enough money in their account before issuing a teller’s check. With this payment option, you’re not relying on an individual but a reliable institution to back up the payment.

If you’re worried about a fake bank draft, you can always accompany the payer to their bank as they order the draft. You can also hold on to your goods or services until the bank draft is cleared. It’s also possible to have your bank call the payer’s bank to check for the banker’s draft legitimacy. You should also check for security details such as watermarks and the bank’s stamp to verify the draft’s authenticity.


A bank draft is a secure and convenient payment method. If you need to make large payments or avoid bounced checks and delayed payments, a bank draft is an ideal payment option. 

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