What is a Bank Draft?

A bank draft is a check that the issuing bank guarantees, somewhat like a cashier's check. The bank first confirms whether the bank draft requester has sufficient available funds. If so, the bank sets aside those funds in order to guarantee the bank draft will be good when used.

Bank drafts prove to the seller that your check won't bounce. Because the bank sets aside the money in order to issue the draft, you cannot use that money for other purchases. If you simply write a personal check and don't have sufficient funds in your account, a personal check could bounce.

You can use a bank draft in cases where the seller wants cash or a cash equivalent. A bank draft is better than using cash because it gives you a record of the transaction. The bank typically makes the draft out to the seller. With cash, you can prove that you withdrew the money, but not necessarily that you gave it to the seller.

Some scams are associated with bank drafts. Con artists can print up fake bank draft checks that look like the real thing. If you are the seller who is accepting a bank draft, either go to the bank with the buyer and watch the bank issue the bank draft or call the bank to determine whether it issued the bank draft. Look up the phone number yourself rather than using the phone number listed on the bank draft.