Payments can be made using a bank draft when safety is an issue. If the seller doesn’t have a relationship with the buyer, they may prefer a bank draft as a payment method.
The buyer may use a bank draft for safety reasons when the transaction is large.
But what is the bank draft all about?
What Is a Bank Draft?
A backdraft definition is not the same as a bank draft. The issuing bank guarantees a bank draft as a payment tool.
A bank draft allows you to make large payments without the need to withdraw cash from your account. Your account is where the amount of the draft comes from. You must have enough money to cover the bank fees and draft.
In this section, we look at how a bank draft works.
Bank checks are also referred to as bank drafts. If the payer requires a bank check drafted by their bank, they just request it.
A bank employee will check your funds to make sure you have enough for the teller’s check and transaction fee. They will transfer the funds from your account to the bank’s internal account once they verify you have enough funds. The bank’s money will already be set aside to make the payment, so this makes a bank draft reliable.
The person receiving the money will have their name written in the bank draft. The drawer’s name and the amount will be included as well.
The drawer is supposed to make sure that the payee gets the draft. Once the payee gets it, they can go to their bank for payment. After verification of the payee’s identity, the bank will deposit the money into their account. You will be able to spend the money within a few business days.
The bank draft’s greatest distinguisher as a payment option is that it is backed by the bank, so we must keep that in mind when coming up with the drafted definition.
Parts of a Bank Draft
There are negotiable and non-negotiable parts to the bank draft. The latter is the part you give to the payee.
Information relating to the transaction is included in the non-negotiable part. It’s your only proof of the transaction if the bank draft is lost or stolen, so you should always keep this part safe.
A bank draft has other parts:
- The payee identity is verified with a serial number.
- The draft is identified as a payment instrument with the help of watermarks and microEncoders.
Can a bank draft be reversed or canceled?
The teller’s check deposit is unlikely to be reversed by a financial institution. The transaction occurred on the bank’s books.
The bank may agree to cancel the draft if the payee hasn’t yet cashed the money.
If you misplace a bank draft before delivering it to the payee, you can always go to your bank and have it canceled. The non-negotiable part of the draft should be brought to the bank for verification. You will be issued a new draft by the bank.
Advantages of a bank draft
A buyer or seller may prefer a bank draft to cashier checks because of many reasons.
There are some reasons:
The bank guarantees a bank draft as a reliable form of payment. The bank needs to confirm that the drawer has enough money in its account for the payee to be certain. A bank draft won’t bounce because there aren’t enough funds in the account.
It’s difficult to cancel a banker’s draft if the money is already in the bank’s account.
Large payments are convenient
There is no limit to the amount of money that can be transacted in a bank draft. It’s preferred when it’s necessary to make high-dollar purchases such as buying a car, a home, or cross-border payments.
You don’t have to worry about carrying large sums of money that can endanger your safety in such transactions. A bank draft is a safer method of transferring large amounts of money.
Receive your money quickly
It takes one to four business days for a bank draft to clear. Personal and business checks can take weeks, and bounce due to a variety of reasons.
A bounced check can be expensive for a business. You don’t have to worry about the risks with a bank draft.
Before issuing a teller’s check, banks make certain the payer has enough money in their account. With this payment option, you don’t need an individual to back up the payment.
You can always accompany the payers to their bank if you are worried about a fake draft. Your goods or services can be held on until the bank draft is cleared. You can have your bank call the payer’s bank to check for the legitimacy of the banker’s draft. You should check for watermarks and the bank’s stamp to make sure the draft is authentic.