Bank Drafts vs. Personal Checks: What Is the Difference?

Bank Drafts vs. Personal Checks: What Is the Difference?
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Bank drafts and checks are financial instruments that permit the transfer of money, but that's where their similarities end. The main differences include who issues and signs the check, who is financially responsible for it and from where the funds are drawn. These are also the differences that make one of these payment instruments more secure than the other.

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What Is a Bank Draft?

A bank draft, also called a banker's draft, a bank check or a cashier's check, is a method of payment in which a financial institution is the issuer. When a bank customer requests a bank draft, the bank or credit union transfers funds from the customer's checking account to the bank's reserve account where the draft will be drawn from.

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An account holder must have sufficient funds to cover the amount. The bank draft must be made payable to a specified person or business. Only the payee may cash or deposit the draft.

How Do I Order a Bank Draft?

The most common way to get a bank draft or cashier's check is to complete the transaction in person where you have your bank account. However, as with many other bank transactions, this is changing.

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Capital One and Navy Federal Credit Union are two of the many financial institutions that allow customers to request bank checks online or through a mobile banking app. However you order it, a bank draft often requires payment of a small processing fee.

Some banks may allow you to purchase a bank check with cash for a fee if you don't have a checking account.

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How Long Does a Bank Draft Take to Clear?

The funds from a bank draft generally take ​two business days or more​ to clear. Holding time policy varies by bank. For instance, Wells Fargo might hold any deposit for ​up to seven days​.

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The financial institution will verify your identity when you present the bank check; the bank needs time to prove that the paper document is not fraudulent. Scams involving counterfeit bank drafts, certified checks and personal checks make this a necessary step.

The exception for bank draft availability may be if the issuing bank of the check is the same one where you have your bank account. If the bank can verify that the check is legitimate, you may be able to access the funds sooner.

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When Would I Use a Bank Draft?

Because a bank draft is a guaranteed, prepaid method of payment, it is generally used for large purchases and instances when a personal check or credit card is not accepted.

Large payments that might require a bank check include down payments on a home or car, loan payoffs or payments to a contractor for major work. For situations like these, the person or business accepting the check doesn't want to risk insufficient funds for such large amounts of money.

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When a bank customer requests a bank draft, the bank or credit union transfers funds from the customer's checking account to the bank's reserve account where the draft will be drawn from.

What Is a Personal Check?

A personal check is one that you fill out and sign yourself. The money is drawn directly from your bank account, and you are the one guaranteeing that the funds are available. If you have insufficient funds, your check will bounce, you will be charged an overdraft fee by the bank and the payee will expect another form of payment.

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How Does a Check Differ From a Bank Draft?

The main difference with a personal check is that the bank is not issuing, signing or guaranteeing the funds. Nothing about a personal check tells the payee that the payer has enough money in their checking account for the payment to be good.

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How Long Does It Take to Cash a Check?

Personal check processing takes about the same time as a bank check. The bank verifies your identity on the spot but may need ​up to three business days or more​ to make the funds available to you. If the issuing bank of the personal check is the same as the payee's bank, the processing time might be shorter.

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Which Costs More: A Check or a Bank Draft?

  • Bank draft:​ The cost of a bank draft or cashier's check can range from about ​$5 to upwards of $15​, depending on the bank and what type of bank account you have. Some banks may offer a certain number of bank checks at no charge.
  • Check:​ Personal checks can range from ​free to under $1​ to write, depending on how much you paid for your book of checks. If you have insufficient funds to cover that check, your overdraft fee might be $30 or more. Overdraft fees are the largest hidden cost of using personal checks.

Which Is More Secure: Bank Draft or Personal Check?

A bank draft is generally a more secure form of payment than a personal check because a financial institution guarantees the funds. However, bank checks can be forged, so a recipient must be careful.

Bank Draft vs. Personal Check

Bank Draft

Personal Check

Who writes it?

Financial institution

Bank customer

Who signs it?

Financial institution

Bank customer

Funds are drawn from:

Financial institution – after amount is transferred from bank customer's account

Bank customer

Funds are guaranteed by:

Financial institution

No guarantee

Average cost

$5 to $15

Cost of the paper check

Average processing time

One to three business days

One to three business days

Can it bounce?

No

Yes

Can it be counterfeit?

Yes

Yes

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