Bank Draft

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DEFINITION of 'Bank Draft'

A type of check where the payment is guaranteed to be available by issuing bank. Typically, banks will review the bank draft requester's account to see if sufficient funds are available for the check to clear. Once it has been confirmed that sufficient funds are available, the bank effectively sets aside the funds from the person's account to be given out when the bank draft is used.

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BREAKING DOWN 'Bank Draft'

Bank drafts are normally involved in transactions involving large sums of money and/or situations where trust can be an issue.

Suppose you are purchasing a new car, showing up with a bank draft allows the dealership the assurance that you have enough money to purchase the vehicle and that your check will not bounce.

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RELATED FAQS
  1. How can I cancel a bank draft that I have purchased?

    It is not commonly possible to cancel or stop payment on a bank draft since it, in effect, represents a transaction that ... Read Full Answer >>
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    The forex market is where currencies from around the world are traded. In the past, currency trading was limited to certain ... Read Full Answer >>
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