travellers cheque vs bank draft

Compare rates and fees for your money transfers.

Read our range of money transfer and banking guides.

Reviews and comparisons of the best money transfer providers, banks, and apps.

Helpful tools to ensure you get the best rates on money transfers.

A Guide to Travellers Cheques

Once a foreign currency staple, this form of prepaid funds has existed for hundreds of years, designed as a way to allow payment from one person to another across currencies. As the financial services sector continues to shift to online solutions , we look at how, where and why travellers cheques are used, as we discuss the relevance of this form of currency.

What are travellers cheques?

The history of the travellers cheque spans as far back as 1772 when the first of its kind was issued by the London Credit Exchange Company, in the UK. Over the coming centuries the concept became popularised on a global scale, with major banks and financial institutions adopting this form of travel money in the 20th century. American Express became the largest issuer of travellers cheques and continues to offer these services to customers to this day.

A safe and convenient method of payment for anyone travelling to foreign territories, these pre-printed cheques hold a fixed amount which can be used worldwide across a range of currencies. Designed to facilitate payments from one person to another, using different currencies, travellers cheques were initially seen as a more practical way for individuals to carry their spending money.

Travellers cheques had their heyday in the late 20th century, reaching peak popularity in the mid-90s, before alternatives such as credit and debit cards became more widely available and easier to manage financial transactions. It was reported in 2018 that a mere 1.5% of Britons use travellers cheques, a rapid decrease over the course of two decades.

How do you use travellers cheques?

When you first receive your travellers cheques, you will be required to sign each one before use, as a way of verifying your signature. Each cheque will have a fixed value (usually $20, $50, $100, $500 etc.) as well as a unique serial number which can typically be found in the top right corner.

It is important to take note of these serial numbers as they will be referenced in any case of lost or stolen cheques. Unlike cash, if anything happens to your travellers cheques, the original vendor will be able to issue a refund for the exact same value. This added level of security is why this payment method was seen as revolutionary when first introduced.

As well as signing upon receipt, you will also need to sign each travellers cheque when used by a retailer or exchanged for cash. The act of signing your name as a form of security is somewhat outdated, given the modern technologies in place nowadays.

When accepted by retailers, a travellers cheque will be treated like local currency, which means you should receive any change in the standard, local currency.

Where can I get travellers cheques?

Due to dwindling demand, travellers cheques are not as readily available as they once were. However, they can still be acquired from some banks and financial institutions, post offices and currency exchange offices, like Travelex.

One thing to note is you may be required to settle the handling, commission or cash-in fees that often accompany travellers cheques, and these can be expensive, amounting to 2 - 3% in some cases. This cost is another reason they are no longer as frequently used.

Where can I use travellers cheques?

Generally, travellers cheques are still accepted all over the world, albeit harder to find vendors selling them and retailers accepting them as legal tender. Consider your destination before deciding on this form of travel money: if you are travelling to major cities there is more chance of you finding somewhere to cash your cheques or use them for in-store purchases. However, more remote destinations may not be equipped or able to accept this type of funds.

How safe are travellers cheques?

The original blueprint for travellers cheques was a paper payment method which could be used as foreign currency but was more secure than handling cash. At the height of its popularity, travellers cheques were generally considered much safer than cash due to the added security of their unique serial numbers, meaning customers could cancel and replace cheques if need be. These numerical codes were a money-back guarantee for anyone whose cheques were misplaced, destroyed or stolen. Another added benefit, if your travellers cheques are intercepted, you will not be vulnerable to bank fraud, as they are in no way connected to your bank account, unlike credit or debit cards.

Financial security measures have evolved greatly since the inception of travellers cheques, however, with the introduction of PIN codes, two-factor authentication, fingerprint touch ID and facial recognition, to name a few forms of fintech security commonly available now. With this in mind, the concept of a travellers cheque no longer measures up in terms of fraud protection and data encryption.

Travellers cheque vs. Cashiers cheque: What is the difference?

In terms of appearance, a travellers cheque looks nearly identical to a standard issue cashier's cheque: but are they similar in any other ways?

A cashiers cheque is issued by a bank or financial institution and is designed to be processed quickly, by the individual whose name is printed on the cheque. Conversely, a travellers cheque is for use overseas, is loaded with prepaid foreign currency - usually USD or GBP - and does not have a name or account number printed on it, although it does require a signature. Because travellers cheques do not have any bank details printed on them, they are deemed safer than cashiers cheques in terms of potential for fraudulent use. In addition to this, they are paid for when printed, meaning it is not possible for a travellers cheque to bounce.

What are the alternatives?

Credit or debit cards.

If you are worried about travellers cheques not being widely accepted where you are going, then this form of travel money will offer more flexibility. Using your regular bank cards overseas provides a record of spending and offers maximum convenience, but there are also some frequently flagged concerns. Primarily these concerns focus on the sky-high fees and below-average exchange rates related to using your debit or credit card abroad. This isn’t always the case, however, as many banks and financial institutions offer travel credit cards, tailored to suit the needs of frequent flyers.

Travel money cards

Prepaid travel money cards are the modern equivalent to travellers cheques and have become very popular. This is largely due to the fact that they are totally separate from your regular bank account, allowing users to spend their balance freely without the worry of potential fraud or overspending. Preloaded with funds, travel money cards often help limit additional currency exchange charges. In addition to this, in spite of fluctuating currency rates, these cards let customers lock-in a favourable exchange rate ahead of time.

International bank accounts

If you are headed overseas for a sustained period of time, it could be more convenient and cost-effective to open a bank account in your destination country. You would be subject to the relevant security and eligibility checks but this decision pays off if you are making regular international money transfers or being paid in a different currency by foreign clients . Find out more about this option by reading our guide: How to Open a Bank Account Overseas.

Due to the growing alternative digital payment methods available nowadays, it seems this age-old travel money no longer measures up in terms of accessibility, cost and convenience. When travellers cheques were originally launched, ATM withdrawals were not commonplace for travellers, and digital point of sale systems had not been invented. Nowadays, it is easy to access local currency using an assortment of different payment methods such as debit or credit cards, travel money cards or money transfer apps .

The best option for anyone who is reluctant to use their debit or credit card overseas, would be to use a prepaid travel money card. Prepaid travel money cards are a safer and more widely used alternative to travellers cheques, and customers do not need to seek out a bank to use them, are not required to sign for each transaction and security measures in place are far more advanced. This method enables customers to secure multiple foreign currencies, locking in the optimum exchange rate for your currency pairing ahead of your trip abroad. Use our comparison tool to ensure you receive the most competitive exchange rates for your international money needs.

Related content

Related content.

• A Guide to Travel Money Cards Travel money cards are a popular payment method for individuals headed abroad. Customers will load funds onto the card, using the money as foreign currency when overseas, much like a debit card is used at home. Also known as travel money prepaid cards or currency cards, they facilitate free foreign transactions and overseas ATM withdrawals. January 16th, 2024
• Revealed: Summer Cruises Increase your CO2 Emission by 4700% per KM vs Train Travel Travelling by cruise ship rather than train this summer could increase passengers’ CO2 emissions each kilometre by 4716%, MoneyTransfers.com can reveal. May 3rd, 2024
• 10 Years of Data Predicts the Go-to Holiday Destinations for Brits Now COVID Is Over To establish the expected changes to tourism and GBP(£) spend abroad going forwards, MoneyTransfers.com analysed 10 years' worth of UK travel data from the Office for National Statistics (ONS) - 2009 - 2019, to discover and predict where Brits will be travelling to in the next 10 years now that travel is well and truly back on again since Covid! February 19th, 2024

• Millennial Guide For Baby Boomers & Generation X We looked over the stats for the past few years, and found that out of £1.5 billion payments abroad, 1 in 5 debit cards payments are made by the UK residents travelling abroad and credit card payments made outside the UK has increased in recent years, reaching 467 million payments. November 27th, 2023

Contributors

April Summers

• Search Search Please fill out this field.

What Is a Bank Draft?

How a bank draft works, how to cancel a bank draft, bank drafts vs. money orders, the bottom line.

• Personal Finance

What Is a Bank Draft? Definition, How It Works, and Example

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics. Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.

Investopedia / Ryan Oakley

A bank draft is a payment that is like a check, but its amount is guaranteed by the issuing bank. The funds are drawn from the requesting payer's account and are then placed in the bank's reserve account until the draft is cashed by the payee. Bank drafts provide the payee with a form of payment that is more secure than personal checks.

Key Takeaways

• A bank draft is a payment that is guaranteed by the issuing bank.
• Bank drafts are often used for larger payments such as a down payment on a home.
• Banks verify and withdraw funds from the payer's account and deposit them into an internal account, or a reserve account.
• Banks normally charge a fee for a bank draft.
• A seller may require a bank draft when they have no relationship with the buyer.

You have several options available to make secure, certified payment options including certified checks , wire transfers , and bank drafts. Certified payment options give the payee more security because the funds are guaranteed,

Bank drafts—also called banker's drafts, bank check, or teller's check—are guaranteed by the issuing bank—in many cases, for a large amount of money. You may be required to provide a bank draft when you make payment for a major purchase, such as for a down payment to buy property.

When you request a bank draft, the bank ensures you have enough money in your account to cover the amount requested. It then withdraws the money from your account and moves it to the bank's reserve account.

The bank then prepares the draft with your name and the amount you are paying the third party, the payee. The draft has a serial number, watermarks, and may even have micro-encoding that identifies it as a legitimate form of payment.

Since the funds are already withdrawn from your account when you buy the draft, the issuing bank essentially becomes the payer.

Bank drafts may be required by a seller when they have no relationship with a buyer, when a transaction involves a large sum, or if the seller believes collecting payment may be difficult.

Banks normally charge customers for drafts. This means that in addition to the amount of the draft, the requesting customer may be liable for a fee —usually a flat fee based on the total amount of the draft or a percentage of the draft. Banks may waive the fee for customers who have a good relationship with the institution or for those who are considered high-net-worth individuals (HNWIs).

Some banks may not put stop payments on drafts once they're issued. That's because the transaction has already taken place, according to their records.

If you want to reverse the transaction, the bank usually requires that you redeem the draft for the full amount. In some cases, it is possible to cancel or replace a lost, stolen, or destroyed draft as long as you have the required documentation.

A bank draft and a money order are both guaranteed for a specific amount and they are both considered a secure method of payment for a payee.

The payer does not need to carry large amounts of money when using a bank draft or money order. However, a bank draft is a check drawn on a bank’s funds after accepting the amount from the issuer’s account, whereas cash is used when purchasing a money order . You can use cash or a debit card to buy a money order, but you cannot use a credit card.

You can only purchase bank drafts from a financial institution like a bank or credit union. You can buy money orders from certified stores and post offices as well as banks.

Since money orders could be used to launder money , you can only purchase a money order in the U.S. for up to $1,000 if you are sending it domestically or for up to $700 if you are sending it internationally. Bank draft amounts can be much higher.

Due to the limited amounts of money orders—and the process banks go through when issuing drafts—money orders typically cost less than bank drafts. Getting a bank draft can be more difficult than getting a money order because you must get the draft from your bank.

What Is the Difference Between a Bank Draft and a Certified Check?

With a bank draft, the funds are withdrawn from your bank account and then the check is made out from the bank, which guarantees it. Your funds are placed into the bank's reserve account. With a certified check, the money is also guaranteed by the bank, but your funds are not withdrawn until the check is cashed. Instead, they are placed on hold.

How Do You Cancel a Bank Draft?

Once a bank draft is given to the person it was intended for, it cannot be cancelled. You, as the purchaser, are responsible for delivering the draft to the payee. If you lose it, you will have to take several steps to get a new draft, which may include providing a surety bond or signing an indemnity.

How Much Does a Bank Draft Cost?

The amount a bank draft will cost will vary by financial institution. Some may charge a flat fee while others may charge a percentage of the check amount. For example, TD Bank charges $9.95 for a bank draft.

While not ideal for everyday purchases, bank drafts can be very useful payments methods when you are making a major purchase. A seller may request a bank draft for added security to ensure they will receive their funds. You may find you need to provide a bank draft for purchases like a car or a home. In that case, you can pay a fee to a bank to get the draft, which you then provide to the seller.

Royal Bank of Canada. " What Is a Bank Draft? "

U.S. Post Office. " Sending Money Orders ."

Corporate Finance Institute. " Bank Draft ." Accessed Sept. 10, 2020.

U.S. Post Office. " Money Orders - The Basics ."

National Bank of Canada. " What Is a Bank Draft? "

TD Bank. " How Do Bank Drafts Work? "

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Capital One Main Navigation

• Learn & Grow
• Life Events
• Money Management
• More Than Money
• Privacy & Security
• Business Resources

All about traveler’s checks, plus modern alternatives

January 18, 2024 | 1 min video

Getting ready to travel? One thing to think about is how you’ll make purchases while you’re away. Traveler’s checks aren’t as common as they used to be. So you might want to consider modern alternatives that may offer the advantages of traveler’s checks and more.

Read on to learn more about the ins and outs of traveler’s checks. And find out about other options—for example, credit cards, prepaid cards and mobile wallets—that could help make the most of your trip.

Key takeaways

• Traveler’s checks are paper documents that can be exchanged for local currency or used to buy goods and services abroad.
• Traveler’s checks feature unique serial numbers, making them replaceable if they’re lost or stolen.
• Fees may apply when purchasing and exchanging traveler’s checks.
• There are modern alternatives to traveler’s checks that you may find more convenient.

Earn 75,000 bonus miles

Redeem your miles for flights, vacation rentals and more. Terms apply.

What is a traveler’s check?

A traveler’s check is a paper document you can use for making purchases when you’re traveling, typically in other countries. It can be used as cash or a regular check.

Traveler’s checks—you may also see them referred to as “cheques”—are generally printed with a unique serial number. This means you may be able to get a refund if your checks are lost or stolen. The checks are usually available in set denominations—$20 and $50, for example. 

How do traveler’s checks work?

Traveler’s checks may be accepted at participating merchants like hotels, restaurants and stores. Just keep in mind that there could be fewer participating merchants than there used to be.

When you purchase your checks, you may notice that they have a space for two signatures:

• First signature: You might be asked to sign each of your traveler’s checks when you buy them. If not, you may want to sign them as soon as possible. 
• Second signature: You’ll usually sign your traveler’s checks again when you’re making purchases.

This dual signature method is meant to provide extra security and ensure that only the purchaser is able to use them. The merchant can verify that the second signature matches the first.

How to cash in traveler’s checks

You can use traveler’s checks like cash to pay for goods and services at participating merchants. You’ll typically sign the check in front of the merchant at the time of the purchase.

While traveling, you may also be able to redeem your traveler’s checks for local currency at financial institutions or your hotel.

Potential fees associated with traveler’s checks

It’s possible that certain fees may apply to traveler’s checks. For example, you may need to pay a fee when you purchase them or when you exchange them for currency once you get to your destination. There might also be a fee for depositing unused checks into your bank account.

Where to get traveler’s checks

While traveler’s checks might be harder to find than they used to be, they’re still available. You may be able to purchase them at some banks, credit unions and travel-related service organizations.

Pros and cons of traveler’s checks

Take a look at some of the potential pros and cons of traveler’s checks:

When to use a traveler’s check

You might consider using traveler’s checks in certain situations, including: 

• When you don’t have a credit or debit card. Some people may prefer to travel using modern payment options like credit and debit cards. But if you don’t have either, you may find traveler’s checks to be an acceptable alternative.
• When you can’t access an ATM. If you find yourself in a place that doesn’t have an ATM on every corner, you can instead use your checks at merchants that accept them.
• When you want to exchange them for local currency. When you get to where you’re going, you might want to have some local currency on hand. You may be able to exchange your traveler’s checks for currency at certain banks or other financial institutions.

Modern alternatives to traveler’s checks

There are a number of alternatives to traveler’s checks—options you may find faster, easier and more convenient. Here are a few to consider when you’re comparing your choices:

Credit cards

Carrying a credit card may be easier than carrying traveler’s checks. Plus, credit cards can be helpful for making large and online travel purchases like plane tickets and hotel reservations. That’s especially true with travel credit cards , which you could use to earn rewards on travel-related purchases.

Some credit cards may also come with benefits that could be useful while traveling. They might include things like protection from unauthorized charges and the ability to use a mobile app to track your purchases .

Keep in mind that foreign transaction fees may come into play when you use your credit card overseas. While this fee might vary between credit card companies, it could generally be in the range of 1%-3% of your purchase. You may also be charged a currency conversion fee. This fee is often part of a foreign transaction fee.

Some companies don’t charge foreign transaction fees. For example, none of Capital One’s U.S.-issued credit cards charge this fee. View important rates and disclosures .

If you’re traveling with your credit card, your credit card issuer may want to be alerted before you go. That’s because it might flag your purchases as fraudulent if it notices purchases made in an unfamiliar location. Thanks to the added security of its chip cards, Capital One doesn’t require this notification.

See if you’re pre-approved

Check for pre-approval offers with no risk to your credit score.

Debit cards

When you’re traveling, a debit card can be just as easy to carry around as a credit card. And like a credit card, it can help protect against fraud. 

The big difference: A credit card lets you “borrow” money for purchases, while a debit card uses the money in your checking account to make purchases.

It may be helpful to carry a debit card when you’re visiting a country that generally favors cash transactions. In that case, you could use your debit card at an ATM to get cash once you’ve reached your destination. And that may be safer than bringing cash with you and exchanging it for local currency once you’ve arrived. 

Keep in mind that you could be charged ATM fees when you use a debit card abroad. According to the Consumer Financial Protection Bureau (CFPB), some banks and credit unions don’t charge customers a fee for using their ATMs. But they might charge you if you’re not a customer—and that could be in addition to a fee charged by the operator of the ATM.

Also, be mindful that some banks may charge a foreign transaction fee when you make purchases abroad with a debit card. You may also be charged a currency conversion fee—often, this fee is folded into the foreign transaction fee.

Some banks, though, don’t charge foreign transaction fees. For example, Capital One doesn’t charge this fee for its 360 Checking account . 

If you take a debit card on your travels, your bank may ask you to notify it beforehand. That’s because it could notice transactions made in an unfamiliar location and potentially freeze your account. Capital One doesn’t require this notification , thanks to the added security of your chip card.

Prepaid cards

Like credit cards and debit cards, prepaid cards may be easier to carry around than cash. They may also offer some protection against loss, theft or fraud once you register them.

But with a prepaid card, you don’t “borrow” money like you do with a credit card—or use money from your checking account, like with a debit card. Instead, you typically add money to a prepaid card before using it.

According to the CFPB, there are a few ways you can add funds to a prepaid card. For example, you can transfer money from your checking account or load funds at some retailers or financial institutions.

You might be charged one or more fees for using a prepaid card. The CFPB notes that if you get your prepaid card from a retailer, you should find a summary of fees on the card’s packaging. If you get your card from a different provider—online or over the phone, for example—the provider needs to share this information on paper or electronically.

Mobile wallet

You’ll probably have your phone with you when you’re traveling, right? Using a mobile wallet to make purchases is another modern alternative to traveler’s checks.

A mobile wallet is essentially a digital version of your real wallet. Depending on the wallet, you may be able to store things like credit cards, debit cards, prepaid cards, boarding passes, hotel reservations, event tickets and other types of personal data. 

Mobile wallets can be convenient, allowing you to make quick and easy payments using your phone or other mobile device when you’re on the go. And they typically use advanced technology that prevents your actual account numbers from being stored in the wallet.

There are lots of mobile wallets to choose from. Researching your options could help you see which will work best while you’re traveling. Keep in mind, some merchants might not take mobile wallet payments.

Traveler’s checks in a nutshell

Traveler’s checks can be a helpful way to pay for things abroad, but there are also more modern options available today, like credit cards, debit cards, prepaid cards and mobile wallets. And with a travel credit card, you could earn rewards on your travel-related purchases.

Ready to upgrade the way you pay before your next trip? Compare Capital One travel credit cards today to find the best option for you, no matter where you’re headed. 

Related Content

How do travel credit cards work.

article | February 8, 2024 | 7 min read

Should you send a credit card travel notice?

article | April 25, 2024 | 3 min read

Foreign transaction fees: What you need to know

article | August 10, 2023 | 8 min read

Bank Draft vs. Cheque

What's the difference.

Bank drafts and cheques are both widely used forms of payment, but they differ in several key aspects. A bank draft is a guaranteed form of payment issued by a bank, where the funds are withdrawn from the payer's account and held by the bank until the draft is presented for payment. On the other hand, a cheque is a written order from the payer to their bank, instructing them to pay a specific amount to the payee. While both bank drafts and cheques can be used for large transactions, bank drafts are generally considered more secure as they are guaranteed by the issuing bank. Additionally, bank drafts are often used for international payments, as they provide a higher level of assurance compared to cheques, which can be subject to clearance and potential fraud risks.

Further Detail

Introduction.

When it comes to making payments, there are various methods available to individuals and businesses. Two commonly used methods are bank drafts and cheques. Both bank drafts and cheques serve as a means of transferring funds, but they differ in several aspects. In this article, we will explore the attributes of bank drafts and cheques, highlighting their similarities and differences.

Definition and Purpose

A bank draft, also known as a banker's draft or cashier's check, is a payment instrument issued by a bank on behalf of a customer. It guarantees the payment as the funds are already debited from the customer's account. On the other hand, a cheque is a written order from an account holder to their bank, instructing them to pay a specific amount to the person or entity named on the cheque.

When it comes to security, bank drafts are considered more secure than cheques. Bank drafts are typically issued by the bank itself, ensuring that the funds are available and the payment is guaranteed. This makes them a preferred method for large transactions or when dealing with unfamiliar parties. Cheques, on the other hand, can be more susceptible to fraud or insufficient funds. The recipient of a cheque must rely on the account holder having sufficient funds in their account to cover the payment.

Clearance Time

Another significant difference between bank drafts and cheques is the clearance time. Bank drafts are usually cleared and funds made available to the recipient within a shorter period. This is because bank drafts are pre-authorized and the funds are already debited from the customer's account. On the contrary, cheques often require a longer clearance time as the recipient's bank needs to verify the availability of funds in the account before processing the payment. This delay can sometimes cause inconvenience, especially when immediate access to funds is required.

Both bank drafts and cheques are widely accepted forms of payment. However, the acceptance of bank drafts may vary depending on the recipient. Some individuals or businesses may prefer cheques due to their familiarity and ease of processing. Additionally, in certain situations, such as rental agreements or international transactions, cheques may be the preferred method of payment. Bank drafts, on the other hand, are often required for large transactions, such as purchasing a property or making significant investments.

When considering the cost, bank drafts and cheques differ in terms of fees involved. Bank drafts typically incur a fee charged by the issuing bank. This fee covers the administrative costs associated with issuing the draft and ensuring the payment guarantee. Cheques, on the other hand, may or may not have associated fees, depending on the account holder's banking package or the policies of the bank. Some banks offer a limited number of free cheques per month, while others charge a fee for each cheque issued.

Record Keeping

Both bank drafts and cheques provide a paper trail for record keeping purposes. Bank drafts often come with a receipt or stub that can be retained by the customer as proof of payment. This can be useful for tracking expenses or providing evidence of payment in case of any disputes. Similarly, cheques also provide a record of payment, with the details of the transaction written on the cheque itself. However, it is important to note that in today's digital age, many banking transactions are moving towards electronic methods, reducing the reliance on physical records.

International Use

Bank drafts and cheques also differ in their international usability. Bank drafts are generally accepted worldwide, making them a suitable option for international transactions. They provide a secure and guaranteed method of payment, which can be particularly important when dealing with unfamiliar parties or large sums of money. Cheques, on the other hand, may face limitations when used internationally. Some countries may not accept foreign cheques or may have specific requirements for processing them, leading to potential delays or complications.

In conclusion, bank drafts and cheques are both payment instruments that serve their purpose in transferring funds. Bank drafts offer enhanced security, faster clearance times, and are often required for significant transactions. Cheques, on the other hand, provide familiarity, ease of use, and can be more cost-effective depending on the banking package. The choice between bank drafts and cheques ultimately depends on the specific requirements of the transaction, the preferences of the parties involved, and the level of security and convenience desired.

Comparisons may contain inaccurate information about people, places, or facts. Please report any issues.

The Forbes Advisor editorial team is independent and objective. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive payment from the companies that advertise on the Forbes Advisor site. This comes from two main sources.

First , we provide paid placements to advertisers to present their offers. The payments we receive for those placements affects how and where advertisers’ offers appear on the site. This site does not include all companies or products available within the market.

Second , we also include links to advertisers’ offers in some of our articles. These “affiliate links” may generate income for our site when you click on them. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor.

While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof.

Bank Draft Vs. Certified Cheque Vs. Money Order: Key Differences To Know

Updated: Feb 2, 2024, 3:53am

Table of Contents

What is a bank draft, what is a money order, what is a certified cheque, difference between a bank draft, money order and certified cheque, bottom line, frequently asked questions (faqs).

Cash isn’t always king when you need to send money or make a large purchase. In fact, it can be seen as a liability and for serious transactions, sometimes a payment method that’s secure and carries a paper trail is preferred.

The most popular alternatives are bank drafts , certified cheques and money orders. They’re all secure payment options, but each has a set of rules and limitations worth looking into before getting any money involved. Here is what you need to know about when and how to use a bank draft, certified cheque and money order.

A bank draft is a payment issued by a bank or credit union on behalf of the account holder. Essentially, it is a piece of paper that says a bank guarantees there are sufficient funds in your account to cover a payment. Bank drafts are often used for major purchases, like buying a house.

Once funds are verified, a bank withdraws the amount of money requested and holds it in a reserve account until the recipient deposits the bank draft. Some banks may refuse to cancel a bank draft because it’s recorded as a transaction when funds are withdrawn. Lost or stolen bank drafts might be replaced if you provide an indemnity bond–a guarantee that one party will be reimbursed should the other party default–as insurance against the loss.

A money order is a cashable certificate issued by a bank or Canada Post. The certificate is paid for in advance with cash or a debit card (you can’t pay with a credit card). Money orders are a safe way to send payments instead of mailing cash or are useful when you don’t have access to a bank account.

When buying a money order, you have to specify the amount and recipient. Money orders can be cashed or deposited into a bank account in Canada or overseas (additional fees may apply). There’s a serial number and security code attached to every money order that verifies when it’s cashed. Any lost or uncashed money orders are generally refunded after 45 days.

A certified cheque is a guaranteed form of payment issued by a bank. It’s similar to a personal cheque with the addition of a stamp and signature from a bank. This tells the person or business receiving payment that your bank account has enough money to pay for the cheque.

When a bank issues a certified cheque, those funds are frozen in your account. Once the recipient deposits or cashes the cheque, your bank will release these funds and transfer payment. If a certified cheque isn’t deposited, the amount is transferred back into your account. Most banks will specify a certain number of days before a certified cheque is no longer valid.

When it comes to choosing a secure and reliable form of payment, bank drafts, certified cheques and money orders all fit the bill. Ultimately, picking a payment method comes down to the issuer, availability, fees, security and the amount of money you need to send.

Bank drafts and certified cheques are only available at financial institutions, whereas money orders can be issued by a bank or Canada Post. Funds for a bank draft or certified cheque are issued by a bank to the recipient. On the other hand, money orders issue funds as a secure certificate prepaid by the sender with security features that allow them to be safely delivered by mail or in person.

There is no limit on a bank draft or certified cheque as long as you have the funds available. Money orders are capped at $999.99, but you can purchase multiple money orders at the same time. The issuer must record specific information from the sender and complete a financial report for money orders when the total transaction amount (including fees) is $3,000 or more. This is done to prevent fraud.

Fees vary for each bank and payment method. Bank draft fees generally range between $9.50 and $9.95. Certified cheques can cost up to $20, depending on whether they’re requested by an account holder with the issuing bank. Money orders are the cheapest option, with fees starting at $7.50. Some bank account service plans (usually the premium packages) will waive these fees.

Availability

For bank drafts and certified cheques, the funds are usually available in the recipient’s account within a few business days. Some banks will release a portion of the funds right away. Money orders are available immediately when cashed or after a few days if deposited into a bank account. Although, no bank account is required to send or receive a money order.

Bank drafts and certified cheques are considered to be more secure because the funds are guaranteed by a bank. Money orders are guaranteed by the person paying, but funds are required upfront instead of being held in a bank account. However, a money order can also be cancelled before it’s cashed, unlike bank drafts and certified cheques.

Bank drafts, certified cheques and money orders all get the job done of guaranteeing the available funds, but there are a few ways your money tied to them could end up in financial limbo. Consider the amount of money you’re sending and if it’s going to end up in a bank account or as cash. It’s also worth it to weigh insurance options so you can recoup the cash if anything happens while it’s in transit.

How does a bank draft work?

To get a bank draft, visit your bank and provide a teller with a government-issued ID, your account information, the recipient’s name and payment amount. They will check your account for sufficient funds and then issue a bank draft. After you give the bank draft to the recipient, they can deposit it into their account to complete the transfer.

How does a certified cheque work?

Request a certified cheque from a teller at your bank. They will ask for a photo ID, the payee’s name and the cheque amount. After they confirm there is enough money in your account, you will receive a printed cheque with a stamp that says ‘certified’. Once you sign the cheque, you can give it to the payee. The payee will have a certain number of days to deposit the certified cheque.

How does a money order work?

Money orders can be purchased from a bank or Canada Post. Bring a valid photo ID and fill out the required form with your name, money order amount and recipient’s name. You must pay the amount on the money order to get a cashable certificate (this is the money order). The maximum amount per money order is $999.99. You can mail the money order or deliver it in person.

What is the difference between a bank draft, money order and certified cheque?

Bank drafts are issued by a bank after verifying available funds and withdrawing the requested amount to put on hold. Certified cheques are similar to bank drafts, but these funds aren’t withdrawn until the cheque is deposited. Money orders are issued by a bank or Canada Post as a prepaid cashable certificate. Money orders can be cancelled, whereas bank drafts and certified cheques cannot be cancelled once they’re issued.

• Best High Interest Savings Accounts
• Best No-Fee Chequing Accounts
• Best Savings Accounts
• Best Online Bank Accounts
• Best U.S. Dollar Chequing Accounts
• Best Student Chequing Accounts
• Best RRSP Savings Accounts In Canada
• Best TD High-Interest Savings Accounts
• Best Joint Savings Accounts
• Best Scotiabank Savings Accounts
• Best Scotiabank Chequing Accounts
• Best TD Chequing Accounts
• Best EQ Savings Accounts
• Best Chequing Accounts
• Best Tax-Free Savings Accounts
• Best Online Banks In Canada
• Best Budgeting Apps
• Best BMO Chequing Accounts
• EQ Bank Review
• WealthSimple Review
• Royal Bank Of Canada (RBC) Review
• Simplii Financial Review
• BMO Bank Of Montreal Review
• RBC Business Banking Review
• Laurentian Bank Review
• EQ Bank TFSA Review
• Compound Interest Calculator
• Income Tax Calculator
• What Is A Void Cheque?
• First Home Savings Account (FHSA)
• What Is A Canada PRO Deposit?
• What Is A Routing Number In Canada?
• Prime Rate In Canada
• Interac e-Transfer
• Can You Deposit Cash At An ATM?
• What Is A Bank Institution Number?
• ATM Withdrawal Limits: What You Need To Know
• What Is A Bank Draft?
• What Is A Transit Number In Canada?
• How To Close A Bank Account
• Bank Withdrawal Fees And How To Avoid Them
• How To Read A Cheque
• Types Of Bank Accounts
• What Is A Money Order And How Does It Work?

More from  

Eq bank tfsa review 2024: the best tfsa account in canada, how to use an atm: a complete guide, prime rate history in canada, laurentian bank review 2024: a well-rounded regional bank, what is a wire transfer, how to switch to a new bank or credit union in canada.

Candice Reeves is a financial writer based out of Nova Scotia. She specializes in personal finance, investing, and cryptocurrency. Her work is featured in leading publications across various industries, including Wealth Rocket, CryptoVantage, and StackCompare.

• Accounts Payable Software
• Accounts Receivable Software
• Travel & Expense Management
• Payment Automation
• Cash Flow Management
• Account Payable
• Account Receivable
• Travel & Expense
• Finance News
• Press Release
• Get Started

Bank Draft- Overview, How It Works, Examples

Bank drafts are frequently used in the financial industry for secure and verified high-value transactions. Despite their popularity, not everyone may be familiar with the different types of bank drafts and the fees associated with them.

However, not everyone is familiar with the concept of bank drafts, their different types, and associated fees. This article provides an in-depth look at bank drafts, including their definition, working mechanisms, and types.

What is a Bank Draft?

A bank draft — also referred to as a bank check, banker’s draft, or teller’s check — is a financial instrument that a bank issues on behalf of its customers.

Widely used in Asia and Europe, a bank draft resembles a traditional paper check and is frequently utilized for transactions requiring a high level of security, such as real estate purchases, large equipment sales, or international trade.

Essentially, a bank draft is a guaranteed check issued by the bank. The bank deducts funds from the customer’s account and holds them in a separate account until the draft is cashed. This ensures that the funds are available and the check will not bounce.

How Does a Bank Draft Work?

Using a bank draft to carry out financial transactions is a straightforward and easy process that can be completed in just a few simple steps.

• The customer files a bank draft . The customer can fill out a form specifying the transaction’s amount in person at a bank, credit union, or other financial institution. The bank will then examine the customer’s account to ensure that there is sufficient money before approving the transaction. Typically, this procedure takes a few days. Be aware that a bank draft request is subject to commission, and the charging costs may vary depending on the issuing bank’s rules, the currency being used, or the frequency with which the customer has made this type of payment.
• The bank withdraws the requested amount from the customer’s bank account . Once withdrawn, the bank will deposit the money in a separate account under the bank’s ownership. In other words, the bank becomes the payee instead of the customer.
• The bank draft is issued. A bank draft normally contains the name of the issuing bank, the recipient’s name, and the draft amount in addition to a special serial number. Different from a regular check, the bank draft doesn’t include the customer’s account number. The customer can then convert the draft into cash which usually takes a few minutes to complete. Once issued, bank drafts cannot be canceled or altered to ensure the highest standards of safety and security.

Types of Bank Drafts

There are various sorts of bank drafts that can cater to needs, and they play a significant role in financial transactions.

It is likely a bank draft that will work for you whether you are making a domestic transaction, sending money abroad, traveling, or making a sizable purchase.

Let’s take a closer look at some of the most common types:

• A demand draft is a safe and dependable payment system because the issuing bank guarantees it, indicating that the money is already in the bank’s control. It is less likely to bounce or become fraudulent as a result.
• A certified check confirms that there are enough funds in the account to pay the check’s value. The funds required to cover the cheque are normally reserved by the bank and held until the check is cashed or deposited. This check is frequently used for significant purchases as well as legal procedures like paying court costs or posting bail.
• A money order is a type of prepaid instrument for paying an individual or a business. It represents a specific sum of money, just like a check. It is prepaid and guaranteed by the issuer, unlike a check. When the payee does not take personal checks or when the payer does not have a bank account, money orders are frequently used. Banks, post offices, and grocery stores are just a few places where you can buy them.
• A domestic bank draft is a reliable choice for transactions within the same country. It can be used to make deposits, pay for purchases, or move money between accounts.
• An international bank draft is designed specifically for transactions that involve foreign currency. It is frequently used for sending money to friends and family who live abroad as well as for international trade.
• A traveler’s check is a practical method to bring cash while traveling. It can be used to get money or to pay for things. Travelers do not need to bring a large amount of cash as they can just utilize a check which is accepted by many companies and financial institutions worldwide. Also, it is easily replaceable if lost or stolen.

Bank Draft Fees

Getting a bank draft incurs fees that can vary depending on the bank and the transaction amount. Banks may charge a flat fee or a percentage of the transaction amount.

Banks may charge as low as $0 , usually for premium account holders, and as high as $9.95 . There’ll be additional charges entailing currency conversions.

To minimize fees, buyers can consider using a bank that offers lower fees or consolidating multiple payments into one bank draft. Some banks also offer fee discounts to their account holders.

Bank Draft vs. Other Payment Methods

Considerations such as security, dependability, cost, and accessibility should be taken into account while choosing a payment option. Bank drafts are a fantastic choice for transmitting bigger sums of money because they are trustworthy and safe, just like Positive Pay .

Bank Draft vs Wire Transfer

While wire transfers include computerized transfers of money between banks or other financial organizations, bank drafts are checks written on a bank’s own cash.

Wire transfers are quicker and more practical for time-sensitive transactions, whereas bank drafts are more secure and frequently utilized for large transactions.

Wire transfers may have lower fees, but they are more prone to fraud and mistakes. Bank drafts are more expensive and take longer to clear. The decision between the two approaches ultimately comes down to personal requirements and preferences.

Bank Draft vs Cashier’s Check

Bank drafts and cashier’s checks are both guaranteed forms of payment, but they differ in how the funds are guaranteed and who signs the check.

The issuing bank guarantees bank drafts, and the money is held until the check is submitted for payment. Contrarily, cashier’s checks must be signed by a bank teller or cashier and are drawn on the bank’s own funds. Cashier’s checks, on the other hand, are drawn on the bank’s own funds and are signed by a bank cashier or teller.

Both types of checks may have similar fees, but bank drafts may be more expensive due to additional administrative work. They are often used for large purchases or international transactions, or when a personal check is not accepted.

Bank Draft vs Automatic Payments

Bank drafts are guaranteed by the issuing bank and are typically used for large or international transactions. On the other hand, automatic payments — an example is Automated Clearing House (ACH) transfer — are recurring payments made from one bank account to another without manual intervention.

The choice between these two methods depends on the nature of the payment. Bank drafts provide added security for one-time large transactions, while automatic payments are more convenient for regular payments.

Bank Draft Pros and Cons

• Secure and reliable payment method
• Applicable for large transactions and international payments
• Serve as proof of payment
• Typically cheaper than wire transfers
• Easy to cancel or reissue if lost or stolen
• Can be more expensive than other payment methods, such as personal checks or automatic payments
• Require visiting a bank branch or arranging delivery
• May take several days to clear, time-consuming and delaying payments
• May have fees and charges associated with obtaining and using bank drafts

Pay Seamlessly with Peakflo

To avoid errors or delays, it is important to understand the bank draft process and fill out the draft correctly. Bank draft scams are a concern, so it is essential to take steps to protect yourself from fraud. By following these tips and understanding the bank draft process, you can use this payment method with confidence and security.

For a lot of businesses, paying bills can be a large obstacle due its the time-intensive cycle of procurement -to-payment. Peakflo can cut your bill payment time by 50%. Our accounts payable workflows can bypass the most complex approval matrix for seamless interdepartmental collaboration.

Finance or the payments team can also pay bills automatically using a digital wallet based on the due date or clear payments in bulk. We also charge one of the lowest FX markup rates in the market. Take a tour of our product to see how Peakflo can be of benefit to your financial operations.

What is the Role of Technology in Accounting?

What is a general ledger(gl) – a complete guide, what is integrated payables & why it’s important for your business, latest post, barclays capital lost millions due to an excel error, ditching legacy systems: the key to a sustainable finance landscape, split payment: streamlining transactions for marketplaces, future-proofing b2b payments: the payment automation handbook, what is the accounting cycle 8 steps explained.

• Accounts Payable
• Accounts Receivable
• Travel and Expense Management
• B2B Payment Software
• Invoice Management
• Procurement Software
• Product Tour
• Saving Calculator

© 2023 by Peakflo. All rights reserved.

Help Centre

• Popular questions
• Digital banking
• Cheques & deposits

What types of cheques can I deposit to my account?

You can deposit any of the following types of cheques as long as they are payable to you:

• Canadian and U.S. dollar cheques
• Money orders and bank drafts
• Travellers cheques
• Certified cheques

Related Articles

Why is my cheque image rejected when I try to make a deposit through the mobile app?

When I try to deposit a cheque with my mobile phone, I get an error message that the cheque deposit feature is under maintenance.

How do I deposit a cheque using Mobile Deposit?

What should I do with my cheque once my deposit is complete?

Difference between a Check and a Draft

Checks and drafts are a few of the instruments provided by banks to their customers in order to pay for products and services. Though both checks and drafts draw from existing customer bank accounts, they also differ in several ways. There are different parties and processes involved when using checks versus drafts. Continue reading this article to understand their differences.

• 1 Summary Table
• 2 Definitions
• 3 Check vs Draft
• 4 How Long Does It Take a Draft to Clear?

Summary Table

Definitions.

A check is a bank instrument or document that instructs a bank to pay a certain amount of money to the person or party whose name appears on the check. The money is taken from the current or checking account of the person writing the check. This person is called the drawer. The drawer indicates the amount, date, payee, and signs the check. Now the bank, also known as the drawee, will pay the amount stated in the check to the payee.

A check may bounce if the payer has insufficient funds in their account to cover the check.

How to Write a Check

The following information must be filled out properly for a check transaction:

• The name of the person or company; also called the payee. Be sure to include any reference number (if there is one).
• The amount of the payment in both words and numbers.
• The day’s date (month, day, year)
• Your signature

A draft is a bank instrument or document created by the bank, also known as the drawer, to be given to a payee. A bank draft is a payment that is guaranteed by a bank on behalf of a payer. Securing a bank draft requires that a payer has already deposited funds equivalent to an indicated amount plus fees to the issuing bank.

Drafts include the following features:

• Prepayment: the bank requires the payer to pay the entire amount of the draft upfront. This ensures that all the funds are available before the bank issues the draft.
• Payee specification: the draft must include the name of the payee (the person who receives the payment). Drafts are usually paid to a specific person, business, or organization.
• Secure payment: drafts are a secure payment method because the funds are paid to the bank by the payee. This means the draft will not bounce, as a check may due to insufficient funds.
• Validity: drafts usually have an expiration date. After that time, the draft may need to be revalidated and/or processed again.

In addition, while banks don’t usually charge a fee for cashing a check, they usually do charge fees for bank drafts.

Check vs Draft

The main differences between a check and a draft is in the parties involved and the methods or processes needed in the bank transactions. For checks, the parties involved are the drawer, drawee, and payee. While for drafts, only the drawer and payee are involved. Checks are drawn by a current account holder of a bank whereas drafts are drawn by one branch of a bank to another branch of the same bank. The signature of the account holder is needed for checks. But drafts do not usually have signatures as they are already signed by an automated machine.

Authorization from the bank and account holder is needed with checks. Also, clearing and approvals are done prior to releasing the money since checks are sometimes prone to fraudulent activities and counterfeiting acts. With drafts, you have assured and confirmed money since the amount is reliably taken out from the account. This type of bank instrument is highly protected by the bank and risks are avoided when taking out money.

There are times when funds are insufficient that is why some checks bounce. But with drafts, they are based on real credit and money in the account. When a draft is made, money is already used.

The payee may stop the check for any reason; however, a draft cannot be stopped.

A check is issued by the payer, while the bank issues the draft.

Three parties are involved in a check transaction: the drawee, the drawer, and the payee. However, only two are involved in a draft transaction: the drawer and payee.

How Long Does It Take a Draft to Clear?

While it may take several days for a check to clear, drafts may clear within 24 hours. This is because the funds are prepaid, and there are fewer steps needed to verify the money is available to back the draft.

• Advertise with us
• Friday, May 03, 2024

Most Widely Read Newspaper

PunchNG Menu:

• Special Features
• Sex & Relationship

ID) . '?utm_source=news-flash&utm_medium=web"> Download Punch Lite App

Understanding the difference between bank draft and cheque

bank draft and cheque

Kindly share this story:

• Inspiring inclusion and women empowerment through banking
• Banking not route to billionaire status, says Sterling Bank MD
• Herbert Wigwe: Exit of banking whiz-kid
• Banks offer individuals and businesses a number of options to conveniently make payments for goods and services and to settle transactions. Cheques and bank drafts are two such methods of payment.
• A cheque is a payment instrument that allows an individual or business to settle transactions. The cheque facility is provided by the bank where the drawer’s account is held.
• A bank draft is a payment instrument that is issued by the bank at the request of the payer.
• A cheque is issued by an account holder of the bank ordering the bank to make a specific payment to the person specified, or to the bearer of the cheque.
• A bank draft is issued by the bank on the request of a bank’s customer.
• Since a bank draft is guaranteed by the bank, individuals making large payments prefer the use of a bank draft instead of a cheque.

All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.

Contact: [email protected]

Stay informed and ahead of the curve! Follow The Punch Newspaper on WhatsApp for real-time updates, breaking news, and exclusive content. Don't miss a headline – join now!

ONLINE FOREX, BITCOIN AND BINARY MANAGER. Do you require the service of a tested and trusted experienced trader who can help you trade your online Forex, Bitcoin and Binary accounts for minimum 10-20% weekly profit?. Click here for details WhatsApp: +2348030797998

VERIFIED: Nigerians can now earn US Dollars with premium domains just like Americans, acquire for as low as $1200 and you profit $19000 (₦23million). Click here to start.

Want ₦100,000 in Free Bets? Sign up on Livescore to get it now! Register here .

Latest News

Woman brutalises 19-year-old primary 3 pupil in anambra, gwr: nigerian lady completes 72-hour nail painting marathon in plateau, nigerian army begins recruitment for non-tradesmen, women, court stops implementation of new electricity tariff , coastal highway: preliminary impact assessment approval granted -minister.

Rano: Ice block seller who became billionaire, owns 120 filling stations, 600 trucks, 60m litre tank farm

Lorem ipsum dolor sit amet, conse adipiscing elit.

Royal Bank of Canada FREE - On Google Play

Royal Bank of Canada

GET — On the App Store

• Find a Branch
• Call 1-800-769-2511

What is a Bank Draft?

A Bank Draft is a physical means of providing payment to a third party. Funds are immediately taken from your RBC bank account in exchange for the draft, guaranteeing the funds for the recipient.

Bank drafts can be used to make a payment to a third party, both in Canada and abroad 1 and are available for a fee of $9.95 each. Some banking packages include a number of free bank drafts per year, so be sure to review your account features prior to requesting one.

Currencies available for bank drafts: CAD, GBP, and EUR.

To order a bank draft 2 , go to any RBC Royal Bank branch in Canada.

Other Ways to Send Money

Interac e-transfer.

Looking for a quick and simple way to send money to others in Canada? Send an Interac e-Transfer, all you need is the recipients email address or cell phone number. It’s FREE 5 , 6 for all personal chequing accounts and can be done in RBC Online Banking 3 or in the RBC Mobile app 3 .

Set up a Direct Deposit

Direct Deposit is a convenient, reliable, quick way to deposit funds directly into someone’s account. All you need is the recipient’s name and account information. A great alternative to cheques with instant access to funds, no holds, and no risk of lost or stolen cheques.

International Money Transfer

Skip going to the branch to send money overseas. Send up to $2500 CAD per day to almost anywhere in the world with new flexible tiered pricing ranging from $6 or $10 per transfer 4 .

View Legal Disclaimers Hide Legal Disclaimers

• Forums New posts Search Forums
• Members Registered members Current visitors Recent Activity
• Free Assessment

Travellers Cheques VS. Bank Draft

• Thread starter avishekchaudhury
• Start date Apr 9, 2010

avishekchaudhury

Star member.

Guys, Other than loose cash, which is best recommened to be carried to Canada? Regards Avishek  

Hero Member

avishekchaudhury said: Guys, Other than loose cash, which is best recommened to be carried to Canada? Regards Avishek Click to expand...

Keeping it alive............  

My wife arrived to Canada with 16K in a draft checked. The checked took 5 weeks to be cleared.  

Bank Draft Vs Certified Cheque In Canada: What’s The Difference? (2024)

Bank drafts and certified cheques are among the most rarely used methods of payment in Canada.

Both methods are used for transferring sums of money (unusually large amounts) from one bank account to another individual or account.

Unlike regular cheques, which can “bounce,” a certified cheque or bank draft verifies that the funds are available by setting them aside.

Both of these payment methods are very similar. However, there are a few differences. Below, we’ll take a closer look at the difference between a bank draft vs certified cheque in Canada .

What Is A Bank Draft In Canada?

Today, bank drafts are used all the time. However, most of today’s bank drafts occur online and can be performed through your bank’s online portal or a third-party money transfer service.

That being said, some instances may call for a traditional paper bank draft .

A bank draft is a form that an account holder fills out, ordering their bank to withdraw funds from their account and send the amount to another bank account.

Essentially, it authorizes money to be transferred between two different bank accounts. Some instances that may require this include:

• Purchasing a plot of land
• Purchasing a recreational vehicle or motorcycle
• Paying for an item won an auction
• Paying for a car
• Making a downpayment on your mortgage

More often than not, bank drafts are primarily handled online. It’s more secure, more accurate, and quicker than making a trip to the bank to sign papers. That being said, paper bank drafts may be used periodically.

Typical costs for a bank draft in Canada range from $5 to $15, though some banks might charge more. Some banks also offer a lower fee or no fee at all for premium account holders.

Security Features of Bank Drafts in Canada

The bank, rather than an individual, is effectively issuing the cheque, providing a higher level of security from the start. Here are some of the security features typically associated with bank drafts in Canada:

• Pre-authorized Payment : A bank draft is a pre-authorized payment, meaning the funds are immediately withdrawn from your account when the bank issues the draft. This guarantees the recipient that the payment will not bounce due to insufficient funds.
• Payable to a Specific Party : A bank draft is made payable to a specific party, adding a layer of security. This limits the ability of others to cash the draft if it is lost or stolen.
• Signature of Bank Official : Bank drafts are typically signed by a bank official or stamped by the bank, which is a security measure that’s hard to replicate.
• Watermarking and Holograms : Some banks use watermarks, holograms, heat-sensitive ink, or other security features that are hard to forge to protect against counterfeit drafts.
• Micro-printing : Micro-printing involves printing text that is so small it is almost invisible to the naked eye. If someone tries to photocopy or scan the draft, the micro-printing usually becomes visible and the copy can be identified as a fake.
• Unique Serial Number : Each bank draft carries a unique serial number that the bank can use to verify its authenticity.
• Cross-checked Records : When a bank draft is presented for payment, the bank will cross-check its records for the serial number, amount, payee, and other details. This makes it more difficult for a fraudster to alter a bank draft.

What Is A Certified Cheque In Canada?

A certified cheque is very similar to a bank draft. To obtain a certified cheque, you’ll need to visit your bank in person and ask them to write one.

When you write a certified cheque, the bank will automatically set the funds aside, thereby certifying that the money is available to the recipient.

Traditional paper cheques can bounce if the recipient deposits the cheque and the cheque issuer doesn’t have the correct funds. The issuer’s bank will usually charge the account holder a fee for the bounced cheque, and the recipient will probably be unhappy.

A certified cheque solves this problem by giving the recipient 100% confidence that the funds are available.

Once the recipient deposits the cheque into their account, the funds that your bank set aside will be transferred. If the certified cheque is not deposited, the set-aside funds will be transferred back into your bank account (although there may be a delay).

You can generally expect to pay anywhere from $10 to $20 for a certified cheque at most Canadian banks. Some banks may offer a lower fee or waive the fee altogether for premium account holders.

Security Features of Certified Cheques

Certified cheques have several safety measures which are similar to bank drafts:

• Pre-verified Funds : The primary security feature of a certified cheque is that the funds are already verified by the bank. This provides assurance to the recipient that the cheque will not bounce due to insufficient funds.
• Bank’s Guarantee : The bank’s guarantee is another safety measure. It means that if for any reason the cheque cannot be cashed, the bank will take responsibility for covering the amount.
• Signature Verification : Certified cheques typically require the account holder’s signature, which the bank can compare with its records to confirm authenticity.
• Unique Serial Numbers : Each certified cheque carries a unique serial number, which the bank can cross-check with its records to confirm that it is valid.
• Security Paper : Certified cheques are often printed on security paper, which can have features like watermarks or heat-sensitive ink to deter fraud.
• Microprinting and Other Anti-Counterfeiting Measures : Certified cheques often include microprinting, which becomes visible if the cheque is photocopied or scanned, as well as other anti-counterfeiting measures that make it difficult to create a convincing fake.

Bank Draft vs. Certified Cheque: Key Differences

Both bank drafts and certified cheques are regarded as more secure methods of exchanging money.

These methods of payment eliminate any doubt that the seller or recipient of the cheque may have about your ability to make good on your payment.

They’re also a lot more secure than carrying around a large wad of cash in your pocket!

The main difference between a bank draft and a certified cheque is that bank drafts are issued directly by your bank to the recipient and are performed immediately.

Conversely, certified cheques are issued by the account holder, and the funds won’t be moved until the cheque is deposited by the recipient .

Here’s a quick breakdown of the similarities and differences between bank drafts and certified cheques in Canada:

Bank Draft vs Certified Cheque In Canada: What’s Better?

At this point, you may be wondering which of these options is a better means of payment. Both are secure, verified ways to exchange money and are typically used to purchase costly items, pay for an invoice, or in business deals.

Transferring money via a bank draft is a bit quicker than issuing a certified cheque . This is especially true if you’re executing the bank draft online, as you don’t even have to leave your house.

However, once you send a bank draft, it cannot be unsent . It’s a lot more final than a certified cheque.

When you ask your bank to issue a certified cheque, the funds will be immediately set aside .

However, they won’t be transferred to the recipient until the cheque is issued and the recipient deposits the cheque into their bank account.

If you change your mind at the last minute, you can just withhold the cheque and cancel it through your bank.

Here’s an example of an instance where using a certified cheque could be beneficial :

You see a used car that you want to buy for $10,000 on Facebook Marketplace. You’re pretty sure it’s a good deal, but you want to take a look in person first.

So, you ask your bank to write a certified cheque for $10,000. If you decide to buy the car, the seller will accept this method of payment because the funds are verified.

After looking at the condition of the car, you realize that it’s not worth the money. So you back out of the sale and explain that you don’t want to buy the car.

Now, you can return to your bank and ask them to cancel the certified cheque. The money that was set aside will be released back into your account.

Bank Draft vs. Certified Cheque vs. Money Order

Along with bank drafts and certified cheques, money orders are another common method of payment used to safely transfer money and pay for goods. A money order is very similar to a certified cheque, except that money orders are paid for rather than issued .

A certified cheque must be obtained directly through your bank and involves setting money in your account aside.

Although money orders can be obtained from your bank, they’re often purchased through third-party organizations like Western Union. The money order allows the purchaser to name a recipient.

The recipient can then deposit the money order into their account just like they would with a traditional paper cheque.

Money orders can be purchased using either cash or your debit card. You’ll usually be required to pay a small fee (typically less than $5) for the money order on top of the money order amount.

Money orders are better suited for lower-value exchanges, while bank drafts and certified cheques are better suited for transferring large sums of money .

Money orders have an amount limit (usually $500), which means you’ll have to pay the money order fee for each increment of $500.

If you want to pay $5,000, you would need to purchase ten money orders and pay ten fees. A certified cheque or bank draft, by contrast, would allow you to transfer the complete amount all at once.

Bank drafts and certified cheques aren’t as commonly used as they were in the past, thanks to digital money transfer services. However, it’s still a good idea to know how these methods of payment work in case you’re ever asked to present one.

My favourite way to send money to people is through Wise. The company is compatible with over 50 global currencies and has some of the lowest transfer fees on the market.

You can read my full review detailing my experience with Wise here .

Check Out These Posts:

Leave a Comment Cancel reply

Save my name, email, and website in this browser for the next time I comment.

Join Our Newsletter

Signup for news and special offers!

You have successfully joined our subscriber list.

Wealth Awesome

Retire Career Credit Banking

Money Invest Guides Tools

Stock Analysis

40 Best Canadian Stocks Best Canadian Dividend Stocks Best Canadian Energy Stocks Banking

ETF Reviews

Best S&P500 ETFs Canada Best AI ETFs Canada Best REIT ETF's Canada

Account Guides

TFSA Limit Calculator TFSA Pros and Cons Ultimate RRSP Guide Banking

Contact About Disclaimer Banking

Disclaimer: The content on Wealthawesome.com is intended for informational and educational purposes only. Consult a licensed financial expert before making any life-changing decisions with your money. No content on this website is intended as financial advice. The publisher of this website does not take any responsibility for possible financial consequences of any persons applying the information in this educational content. As an Amazon Associate I earn from qualifying purchases.

© 2024 Wealthawesome.com. All rights reserved

Privacy Policy | Terms Of Use