What Is a Bank Draft and How Do You Get One?

A bank draft is a secure payment method where the issuing financial institution guarantees the specified amount. Unlike a personal check, which draws funds directly from an individual’s account, a bank draft involves the bank withdrawing funds from the payer’s account and holding them in its own reserves until the draft is cashed. This makes bank drafts reliable for significant transactions, such as real estate or vehicle purchases, where a personal check might not be accepted due to the risk of insufficient funds.

Key Characteristics of a Bank Draft

A bank draft is a secure payment method because the funds are guaranteed by the issuing bank. This ensures the recipient that funds are available and the payment will not “bounce,” making it a trusted form of payment for large sums. It does not display the customer’s personal account number, adding a layer of security. Bank drafts are used for substantial purchases, providing certainty in high-value transactions.

Bank drafts differ from other payment instruments. A cashier’s check is also bank-guaranteed, but it is typically issued by the bank with the bank’s name and information. A bank draft, however, is issued on behalf of the payer, often including the sender’s name. A certified check involves the bank verifying and freezing funds in the payer’s account, without issuing the check from its own funds. Money orders, while guaranteed, typically have lower maximum amounts, often capped around $1,000, and can be obtained from non-bank locations.

Preparing to Request a Bank Draft

Before visiting a financial institution to request a bank draft, gather specific information and necessary documentation. You will need the exact amount of the draft and the full legal name of the payee, who is the individual or entity receiving the payment. Ensure the designated bank account has sufficient funds to cover the draft amount, as funds will be withdrawn directly from it. Gathering this information beforehand ensures a smooth and efficient process at the bank.

Have valid identification readily available, such as a government-issued photo ID. Most financial institutions require this to verify your identity. A fee is typically charged for issuing a bank draft, which can vary by institution but commonly ranges from no cost to around $10.

Steps to Obtain a Bank Draft

After gathering your information, visit your bank branch in person. Speak with a bank representative to initiate the request and fill out a form. This form formalizes your request and ensures all details are accurately recorded. On this form, you will provide the exact amount of the draft and the payee’s full legal name.

Present your identification for verification. The representative will confirm all the draft details with you. After verification, funds will be withdrawn from your account, and any associated fees will be paid. The bank will then issue the physical bank draft; immediately verify all information printed on it, including the payee’s name, the amount, and the date, to ensure accuracy.

After You Have Your Bank Draft

After obtaining your bank draft, ensure its proper delivery to the intended payee. As a physical document, similar to cash in its security, it should be handled with care. Keep a record of the draft, such as a photograph of both sides or the bank receipt. This record can be helpful if any issues arise later, such as a dispute or loss.

If a bank draft is lost, stolen, or damaged, report it to your issuing bank immediately. Recovering funds can be a complex process, as the bank has already guaranteed the funds. Your bank may require an indemnity form, a legal promise to reimburse the bank if the original draft is later cashed. A police report may also be required, and the reissuance or refund process can involve additional fees and waiting periods.