An international bank draft is a transfer of money from one person to another in a different country using a bank account. In addition, the transaction is guaranteed by the sender's bank. This is one of the reasons people use them instead of other forms of paper or electronic payments.
Understanding what an international bank draft is, as well as the foreign draft meaning, and how they work will help you add this type of payment option to your personal finances.
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Consider Also: How to Send a Bank Draft
Bank Drafts Basics
Bank drafts are transactions that, unlike regular checks, are guaranteed by the issuing bank. Let's say you want to rent a house for a vacation overseas and you need to put down a $1,000 deposit. The landlord wants the first month's rent in advance. If he doesn't have PayPal, Venmo, Zelle or CashApp, a bank draft is a secure payment option that's been around for decades and many people know and trust.
You send the $1,000 draft from your bank to the landlord. Your bank removes $1,000 from your account and holds it in one of the bank's accounts until the landlord cashes the draft. This helps the landlord avoid receiving the check, sitting on it for a few days or a week, and then trying to cash it, only to find out that you've overdrawn your account during the past few days.
Consider Also: How Bank Drafts Work
International Bank Drafts
One problem with international bank drafts is that transactions can take longer. This is especially true if you are using paper drafts and snail mail. If you want to speed up the process, you'll have to pay for overnight delivery of your draft.
Consider Also: Bank Draft vs. Check
Similar Types of Checks
More and more people are using digital banking, and e-payments made from a bank are often called drafts. For example, your utility, cable or internet provider might draft your monthly payment from your checking account if you set that up with your provider.
Cashier's checks are similar to bank drafts, but they are guaranteed by the bank with its own money, not yours. Of course, you'll need to pay the bank or have enough in your account to guarantee the check.
Because the money is from the bank's account, most banks will cash it for you immediately. That's because it's not going to bounce. Many people use the terms "cashier's check" and "bank draft" interchangeably – ask your bank if this is true, and if not, what the difference is.
Certified Checks and Money Orders
With a bank draft, your money is being used, and even though the bank is holding it to make sure your draft goes through, the transaction might take an extra day or so. A certified check is one that you write and sign, and the bank certifies that the check is legitimate and you have enough money to cover it – at the time you wrote the check.
Banks don't always guarantee certified checks, so they are not as secure as bank drafts or certified checks. A money order is like a check, but you might not need to have an account at the institution issuing the money order. For example, if you go into the grocery store customer service counter, you can often send money out of the country by purchasing a money order and then mailing it. This is safer than sending cash through the mail.