A bank draft is a check drawn on a bank’s funds and is guaranteed by the bank that issues it. Similar to a cashier’s check, a bank draft is safer than a personal check when accepting large payments. To get a banker’s draft, a bank customer must have funds (or cash) available, and the bank will freeze or keep those funds in the bank’s own account until the payment is completed.
Banks are able to guarantee bank drafts because the customer has already “paid.”
The term bank draft is used for other situations, and use varies from country to country. For example, electronic bill payments that move funds directly from a bank account to a service provider (such as an electric utility provider or an online merchant) are also called drafts. Scroll down for a discussion of that type of draft.
Basic Bank Drafts
A traditional bank draft is a form of payment used when safety is important.
Large amounts: For high transactions, the consequences of a returned (or bounced) check would be significant. It’s risky to send expensive goods or complete a deal when there’s any uncertainty about a successful payment. A bank draft is a guaranteed form of payment that makes the payment much more likely to go through.
Available funds: Standard checks can take several business days to move through the banking system. Receiving a cheque doesn’t mean you actually receive funds (and can withdraw the fund).
Bank drafts will generally be available in the recipient’s account within one business day, and it’s unlikely that the bank will reverse the deposit a few days or weeks later.
Bank drafts are often used for international trade or purchasing a home. The term “cashier’s check” is sometimes used instead of bank draft, especially in the United States.
A cashier’s check is very similar to a bank draft: it’s a check that’s printed and guaranteed by the bank after the bank receives money from the drawer (the person who wants to make a payment).
According to CBN Guide to bank charges, section 9.1, for customers it is charged; 300 naira on Current Account, 500 naira on Savings Account. And N500 + 0.1% of Draft value for non – customers.
