Definition

Noun: A bank draft is a type of secure payment instrument. It is a written order for payment, drawn by one bank (the issuing bank) on its own funds or on funds it holds at another bank (the correspondent bank). It guarantees payment to the named recipient.

Usage

A bank draft is used as a secure method of payment, often for large transactions, because the funds are guaranteed by the issuing bank. It is considered more reliable than a personal check. * The buyer provided a bank draft for the full amount of the car. * For the house deposit, the real estate agent required a bank draft, not a personal check.

Advanced Usage

• Bank Draft vs. Cashier's Check: In many contexts, the terms "bank draft" and "cashier's check" are used interchangeably, as both are bank-guaranteed instruments. However, technically, a cashier's check is drawn on the bank's own funds, while a bank draft may be drawn on funds held at another institution.
• Stop Payment: While difficult and rare, it may be possible to stop payment on a bank draft if it is lost or stolen before it is cashed, but this typically requires an indemnity bond.

Variants and Related Words

• Banker's Draft: A direct synonym for "bank draft."
• Demand Draft (D/D): Often used interchangeably, especially in international trade.
• Check (or Cheque): A more general term for a written order to a bank to pay a specified sum. A personal check is less secure than a bank draft.
• Money Order: A similar secure payment instrument, but often purchased with cash and not necessarily drawn by a bank.

Synonyms

• Banker's draft
• Demand draft
• Cashier's check (in common usage)

Related Phrases

• To issue a bank draft: The action of a bank creating this payment instrument for a customer.
  • I need to go to the bank to issue a bank draft for the tuition fees.
• To pay by bank draft: To use a bank draft as the method of payment.
  • The seller prefers to be paid by bank draft.

Noun

1. a draft drawn by a bank against funds deposited in another bank