What Is Bank Drafts: Guide for International Money Transfer

A bank draft is a kind of payment that is supported by your financial organization’s guarantee of money. It is a paper document that resembles a standard cheque in appearance. The primary distinction is that, unlike a standard cheque, which may bounce, a bank draft gives the recipient assurance that the money is accessible. Drafts from banks are made payable to the recipient. The draft will also include your name and the amount.

What are Bank Drafts?

Bank drafts are a type of payment instrument that a buyer might request from a seller in the case of a significant payment transaction. They consist of a single cheque that is issued and signed by the buyer’s bank in response to the buyer’s request. 

When it comes to making major transactions between individuals, such as the selling of pieces of art, secondhand automobiles, or home goods, bank drafts are a popular payment method to consider using.

How do Bank Drafts Work?

Bank drafts function in the same method as physical cheques, with the exception that the issuing bank, rather than the client, is the one responsible for preparing the document. To further understand how this procedure operates, below is a step-by-step explanation.

1. The Client Asks for a Bank Draft

Requesting a bank draft from their bank, credit union, or other financial bank is how a consumer starts the process. The bank will confirm that there are sufficient funds in the requester’s account to fulfill the customer’s request. Those who make regular payments of this kind may be eligible for free bank drafts from some banks, while others may impose a small cost.

2. The Bank Takes Funds Out of the Client’s Account

The desired amounts will be taken out of the customer’s bank account and deposited into a different bank account. Technically, the bank becomes the paying party in this phase instead of the client who made the original request.

3. A Draft is Issued by the Bank

The payee’s name and amount can now be printed on a real document that the bank can create. Additional identifying information, such as a serial number, watermarks, and maybe micro-encoding, will be included in the draft. However, unlike a standard cheque, this one will not include the customer’s account number because the bank issues the cheque directly.

How to Cancel Bank Drafts?

You can receive a refund on your bank draft if you decide not to proceed with the purchase or if the seller cancels the transaction. To complete the process, simply present both drafts to your banking institution. This frequently occurs when companies invest money to bid on a project but lose out on the contract.

Pros and Cons of Bank Drafts 

Each method of payment has advantages and disadvantages. These are the benefits and drawbacks of bank drafts.

Advantages of Bank Drafts

Using a bank draft has several advantages, such as:

• Payments are insured by a reliable bank
• Various foreign currencies are available
• There is no upper restriction or maximum amount.

Because of these advantages, bank drafts are a more advantageous payment method than cheques or money orders. They also allow for some flexibility concerning the kind of currency and purchase price.

Disadvantages of Bank Drafts

Using a bank draft has several disadvantages despite these benefits, such as

• Every bank draft is a visible document that may be misplaced or stolen
• The process of issuing one might take a long time. 
• The individual making the payment may also be responsible for any additional expenses.

Alternative to Bank Drafts

A certified cheque, cashier’s cheque, or money order are other options for sending money that consumers and company owners have in addition to drafts. A faster and safer option to transmit money could be provided by money transfer services. Users may easily move money between people using a wider range of personal finance applications. Depending on the service you choose, there could be a cost, and some applications might restrict your transfers or hold money if you try to send a lot of money at once. With no fees and quick, safe transactions for all of your money transfer requirements, TangoPay comes out as the most trustworthy application in money transfer services.

Conclusion 

Although they might not be the preferred method for routine purchases, bank drafts excel in important transactions. For an extra degree of protection and to make sure they get their money without any problems, sellers frequently ask for bank drafts. A bank draft may be necessary when making large purchases, such as a purchase of a home or a car. You just get it for a charge from your bank and show it to the seller.

But why limit yourself? Look no further than TangoPay for a quicker and more efficient option. It is the ideal option for all of your financial demands because it allows you to transfer money fast and securely with just a few clicks.