Bank drafts are useful in instances where cash, money orders, or checks just aren’t an option.
A guaranteed bank draft can be a desirable alternative for both the sender and the recipient, particularly if you need to pay a sizable sum of money to a third party. They’re frequently utilized to purchase homes or automobiles.
Look no further if you want to find out more about obtaining or cashing a bank draft in Canada. In this detailed book, we’ll go over those subjects and more.
A bank draft is what?
You can transmit sizable sums of money from your bank to a third party using a bank draft, a secure method of payment. They have no upper limit, unlike money orders, other than the amount you have on hand in your bank account.
They are fantastic choices for sending significant sums of money or making expensive transactions with secured finances.
Their adaptability is yet another distinctive quality. Because bank drafts are frequently offered in multiple currencies, they are suitable for both domestic and foreign transfers. Depending on the type of account you have, your bank may impose a fee on you for currency conversion.
Bank drafts frequently have costs, but occasionally they don’t. Again, the sort of account you have with the financial institution where you’re putting up your bank draft will typically determine this.
The costs can range between $9.95 and $0. Because of this, many users find bank drafts to be a convenient cash substitute.
Obtaining a Bank Draft
Bank drafts, as opposed to money orders, are exclusively offered by banks and other financial organizations. Therefore, to receive a bank draft, you must have a chequing account.
Let’s use bank drafts from TD as an example to show the procedure for acquiring one. You will first go in person to a TD Canada Trust branch.
The teller will need to know the bank draft’s amount, recipient, and withdrawal account. If you are ordering a foreign currency, you will purchase it at the current exchange rate.
You will be asked to pay any associated fees (usually around $9.95 unless you have a premium account) when the bank draft has been completed and signed by the bank.
The money will be taken out of your account right away and held in reserve at the bank until the beneficiary deposits the bank draft.
You are in charge of promptly delivering the bank draft to the specified recipient. Keep in mind that once a bank draft has been delivered to a recipient, it cannot be canceled; treat it like currency.
How to Cash a Canadian Bank Draft
Take your bank draft to any financial institution to have it cashed. Make sure you have a photo identity card or passport on you because the staff servicing you will need to check it to confirm that you are the intended recipient.
The bank will start the process of putting the money into your account after your identity has been confirmed.
The time it takes to access the money can range from one to four business days, however, this process is typically rather quick. For processing, you should allow more time during bank holidays.
You’re in luck if you’re cashing a bank draft because the financial institution that issued it guarantees them. Therefore, you won’t have to be concerned about not receiving your complete payment.
A bank draft could also be cashable at an ATM.
Check vs. Bank Draft
Despite having many visual similarities, bank drafts and checks differ significantly in a few key ways. A bank draft is guaranteed, which is its main benefit.
Your bank or credit union will take the money out of your account and put it in its reserves, from the sender’s perspective. The recipient can rely on the availability of the full amount in this way.
The draw on bank drafts, in the recipient’s eyes, is just that: a knowing availability of the whole amount.
If you’re wondering how to cash a bank draft in Canada, it works in a manner akin to that of cashing a check: you can deposit or cash a bank draft at your bank.
A bank draft resembles a certified check the most (rather than
In that it is guaranteed by a financial institution and cannot be halted or canceled after it has been established, a bank draft is most like a certified cheque (rather than a personal cheque). Bank drafts, like checks, can be mishandled and are vulnerable to fraud and forgeries.
Pros and Cons of a Bank Draft
Pros:
There is no cap on the amount of money you can transfer.
offered in a range of currencies
Assurance of funding availability
CDIC coverage Negatives
cannot be stopped or canceled
Risk of deception or abuse
Usually, there are small fees.
Alternatives to Canadian Bank Drafts
Depending on your chequing account package, Interac e-Transfers are speedy and frequently free if you are sending little sums.
As an alternative, even without a bank account, you can buy a money order. However, they are typically given out for sums below $1,000.
An international money transfer tool like Wise is useful when sending money abroad.
Although they are less frequent now, certified cheques are still available at select banks and are still used for large payments.
Finally, although it could be more expensive, a wire transfer is a great way to move money between banks.
