Bank Draft
Candlefocus EditorA bank draft is a safe and secure payment method that provides assurance that the funds will be delivered in full and on time. It is an appealing way to clear payments between two parties, particularly if there is no prior relationship between them or if the amount is large.
A bank draft is like a cheque, in that it is a written order to a third party (in this case the bank) to pay money to the recipient. However, unlike a cheque, the bank draft is not drawn against a specific account. Instead, the funds are immediately withdrawn from the issuing bank’s own account and deposited into the recipient's account. This means there is no risk of the bank draft bouncing, as could be the case with a cheque. There is also no need for the recipient to wait for the issuing bank to clear the funds.
Moreover, a bank draft is considered a kind of “guaranteed payment”, since the bank ensures that the funds are available. As such, both parties involved in the transaction know that the other party is able to fulfil their obligations. The payment can be finalised quickly and securely, without any risk of the draft not being honoured.
In order to get a bank draft, the buyer of the goods or services must first request one from their bank. The bank will check that there are sufficient funds in the account to cover the amount requested, and once verified the bank will issue a draft.
Once the draft is issued, the buyer must then provide it to the seller. The seller can deposit it with their bank, who will enquire at the issuing bank that the payment has been made. When they are sure of this, they will then credit the seller's account with the amount.
It should be noted that banks typically charge a fee for issuing a draft, so this is an additional cost to consider when making a payment. However, the assurance of a safe and secure payment may well make it worth the extra cost.
In conclusion, a bank draft is a reliable and convenient way to make a payment, particularly where the two parties have no existing relationship. It is a trusted form of payment that provides the security of having the funds available immediately, ensuring a swift and risk-free transaction.