Bankers Draft
A document similar to a cheque but drawn on the bank (or building society ) itself against a cash deposit.

A bankers draft is thought of as being a secure way of receiving money where the payer's own cheque might not be honoured and where it's not convenient or desirable to receive cash. 

Commonly used for large purchases such as homes and cars.

It is similar to a cheque except the money has already been debited from your account - giving the payee the satisfaction that payment is guaranteed.

You must give notice to the bank that you require a banker's draft (usually 24 hours) so that they can prepare the draft and check that you have enough money in your account. There may also be a small fee to pay for issuing a banker's draft.

On picking up the bankers draft from your bank, the amount is immediately debited from your account.

When the creditor deposits the banker's draft in their account, they will be credited the stated amount (which has already been debited from your bank account).

1 You contact the bank (with 24 hours notice) to request a banker's draft for the required amount
2 On agreement, the bank processes your request and produces the banker's draft
3 You visit the bank and collect the banker's draft in addition to paying a small administration fee
4 The amount is debited from your bank account
5 You give the banker's draft to the payee
6 They deposit the banker's draft into their account which is credited with the stated amount

BEWARE that

Bankers drafts may be

FAKE - most people aren't familiar with these things anyway;  they're far easier to duplicate than a bank note.  Check with the bank that issued the draft to make sure it is genuine.

STOLEN - again check with the bank to make sure the person presenting it is the owner.

STOPPED - in theory the draft is as good as cash;  in reality some banks seem to allow drafts to be stopped like a normal cheque. 

For all the above reasons,  DO NOT release your goods until you are sure payment will be made.  Just having the draft in your hand does not mean that payment is guaranteed.

Above all do not lose a bank draft.  In this situation the bank is likely to advise that payment of the draft cannot be stopped,  and that the money has effectively been lost,  just like leaving banknotes in the street. 

You may be able to obtain another draft if you sign a declaration to confirm the loss,  and promise that the original will be returned to the bank if it is ever found. 

Don't send drafts by post or messenger - it really is worth carrying these things by hand,  and always get a receipt.

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Last update 08-05-04
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