Send large payments overseas securely.
Similar to a cashier’s check, bank drafts are usually used for large payments overseas. Though not the quickest way to send money, bank checks are accepted in most countries.
How does a bank draft work?
A bank draft is effectively a check from a financial institution, which means the funds for the transaction are withdrawn from the institution rather than from the check drawer’s account.
This offers an important benefit over an ordinary check from an individual. The funds from a normal check are not withdrawn from the drawer’s account until the check is cleared, which means there may not be sufficient funds available when the check is cashed and it may therefore bounce.
With a bank draft, however, when a person requests one they must immediately transfer the funds from their account to cover the amount of the check. This adds a crucial extra level of security over a normal check.
Drafts can be drawn in the foreign currency you choose and are available for personal or business use.
How to compare bank drafts
- Fees. This is the most important factor to look at when comparing bank drafts. Look at the different fees charged for obtaining a draft and see if you could save money with a different provider.
- Available currencies and countries. Speak to your bank or financial institution about the currencies in which you can obtain a bank draft and the countries to which you can send them.
- Processing time. Once you apply for a draft, how long will it take for your financial institution to process it?
- Application options. It’s also a good idea to compare the different methods available when applying for a bank draft. You’ll typically need to visit a branch or apply in writing.
Pros and cons of a bank draft
- Accepted in most parts of the world. International bank drafts are accepted in the majority of countries around the globe.
- Inexpensive. Although you will have to pay a fee when you apply for an international bank draft, drafts are still a relatively cost-effective method of sending funds overseas.
- In local currency. As the check is made out in the local currency where it will be sent, it does not require conversion and is therefore able to be banked quicker than a check written in USD.
- Secure. Bank drafts must be deposited into a bank account and cannot be cashed.
- Slow. Bank drafts typically take several weeks to process, so they’re only a viable option where the speed of the transaction is not a concern.
What are the risks?
Keep an eye out for the following risks when it comes to bank drafts.
- Funds not arriving in time. As mentioned, international bank drafts are quite a slow method of sending money overseas. If you need to send funds urgently, do not bother applying for a bank draft.
- Fees. As with any financial product or service, it’s important that you’re aware of the fees and charges that apply to your bank draft. This can save you a lot of money in the long run.
- Your country of choice may be unavailable. Make sure to check which countries and currencies your bank will allow you to send a draft in and to.
Need to send money quickly?
The transfer services below are not bank drafts, but rather allow you to make bank transfers which can be received by your recipient in their bank account or as cash.