A Bank Draft is conventionally a cheque drawn on bank’s fund. In some cases, a Bank Draft is also called a “cashier’s cheque”. A Bank Draft is only issued to you, after you have paid the required amount along with some fee to the bank. Instead of paying cash, you can choose to deduct the amount from your account.
When you give a Bank Draft, the receiver has a better chance of being paid.
Bank Drafts usually have the following utilities
- Bank Drafts are used when you want to pay guaranteed funds to the payee. For instance, while paying your college fees you might need to give a Bank Draft instead of a personal cheque. Also, whenever you want to buy a property, most often you are required to pay using a Bank Draft instead of a cheque.
- This term is also used in bill payments. When we use this term for paying bills, it means that an electronic transfer has been made from the payer’s account to that of the payee.
- Bank Drafts are also used in international trade.
A Safer Option
Bank Drafts are assumed to a more safe and secure option by sellers as the amount is guaranteed by the draft issuing bank. In case of a personal cheque, it might or might not get bounced. But a Bank Draft won’t get bounced (unless there is an exceptional case, as discussed below).
How safe are Bank Drafts?
Even though Bank Drafts are safer than personal cheques, you can not always assume that you will get your payment through these! There are two exceptional cases, under which you may not get any payment through a Bank Draft.
- If the draft is not issued by the bank, i.e the draft is fraudulent.
- The issuing bank is not legible to pay any outstanding drafts, if in case it goes bankrupt.
Bank Drafts are a convenient, safe and secure option for payments.
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Bank drafts are considered to be the safest option for payment. It is far better than cheques cause cheques can be dishonoured but not drafts. But what happens if these drafts are misplaced? Same procedure has to be applied or what? But the extra cost the issuer has to bear on issuing of these drafts, might make them less popular.
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