A bank draft is a payment instrument issued by a bank — the bank itself guarantees the funds, making it safer than a personal cheque. It is used for large, secure payments where certainty matters. Here is the full picture.
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What a Bank Draft Is
You pay the bank upfront and it issues a draft payable to a named recipient. Because the bank is the drawer, the draft is guaranteed — unlike a personal cheque which can bounce.
Bank Draft vs Cheque vs Wire
- Cheque: drawn on your own funds; can bounce.
- Bank draft: prepaid and guaranteed by the bank.
- Wire/EFT: electronic transfer; fast but no paper.
When to Use One
- Large purchases (vehicles, property deposits).
- A recipient requires guaranteed funds.
- International dealings with formal payment proof.
Fees and Process
Banks charge a draft fee plus possible verification costs. Provide exact recipient details, since drafts are usually for a named payee and replacement can be hassle.
FAQ
Is a bank draft safer than a cheque?
Yes — guaranteed funds make it preferable for large transactions.
Can a bank draft be cancelled?
Sometimes, with fees and the return of the original draft; policies vary.
Related: ACH Explained and Nigerian Sort Codes.