If you are at this stage, congratulations. you have few more steps to go before securing your future home.
A draft cheque is often required when making a large purchase such as a home or vehicle.
What You'll Learn:
What is a Bank Draft?
A bank draft is a negotiable instrument that can be used as payment just like a check. Unlike a check, though, a bank draft is guaranteed by the issuing bank.
The total amount of the draft is drawn from the requesting payer's account—their bank account balance decreases by the money withdrawn from the account—and is usually held in a general ledger account until the draft is cashed by the payee. Bank drafts provide the payee with a secure form of payment.
How Bank Drafts Work?
When you ask to purchase a bank draft, the funds are immediately withdrawn from your deposit account. These funds are put into the bank's reserve account until the bank draft is presented for payment.
As the purchaser of the bank draft, you are responsible for delivering the bank draft to the payee. Once the bank draft has been deposited by that individual or entity, their financial institution may still put a hold on the funds until the bank draft clears the payments system.
How Do I Obtain a Draft Cheque?
You can only purchase a bank drafts from a bank, while money orders can be purchased from certified stores, post offices, or banks.
Visit your banking institution branch and ask for a draft cheque.
The associated fees to obtaining a bank draft may vary from institution to institution, but usually the fees are between CAD$8.50 to CAD$35 depending on the transaction size and your banking institution.
Banking Institutions Draft Fees:
Bank Drafts vs. Money Orders
A bank draft and a money order are both prepaid, with a specified amount printed on the instrument itself. Each is considered a secure method of payment from a third-party institution. The payer does not need to carry large amounts of money when using a bank draft or money order. However, a bank draft is a check drawn on a bank’s funds after accepting the amount from the issuer’s account, whereas cash is used when purchasing a money order.
A bank draft can't be cancelled once it has been delivered to the person it's for. If you lose the draft before you have been able to deliver it, you can replace the lost draft if you are the purchaser but you may have to sign an indemnity or provide a surety bond from a licensed insurance company before the draft is replaced.
Some banks may not put stop payments on drafts once they're issued. That's because the transaction has already taken place, according to their records. If the purchaser wishes to reverse the transaction, the bank usually requires that they redeem the draft for the full amount. In some cases, it is possible to cancel or replace a lost, stolen, or destroyed draft as long as the customer has the right documentation.