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Bank drafts offer secure payment similar to a check, but with guaranteed payment. Cashier’s checks are commonly used for large payments, and physical characteristics distinguish them from checks. Payment is guaranteed, but banks can cancel payment if the check is fraudulent within a certain timeframe.
Bank drafts are a payment method similar to a traditional check, but with some clear differences. Wires are most commonly used for large payouts. This is because, in most cases, payment is more guaranteed than with a personal check.
The main purpose of bank drafts is to offer a combination of the convenience of cash with an even higher level of security than a personal check. This is reflected in a common alternative name for bank drafts: cashier’s checks. The main technical difference between a cashier’s check and a personal check is that the money order is “drawn” at the bank rather than an individual’s account. The bank draft is more commonly used for large payments to individuals than to businesses. This is because companies will normally have facilities to receive electronic transfers or card payments.
There are several physical characteristics that distinguish money orders from checks and similar documents. The name of the person using the money order for payment does not appear on the document. Although the person making the payment receives the draft, it is the recipient’s name that appears on the document. Security measures such as a hologram will often be added to the document. In many cases, the document will be signed by two bank representatives instead of just one person.
The precise rules governing money orders vary from country to country. The general principle is that payment is guaranteed, either up to a certain level or up to an unlimited amount. This means that someone who accepts the bank draft does not have to worry about it being bounced due to insufficient funds. This makes it a very popular method of paying for expensive items like cars or even houses.
There are some limitations to this warranty. Banks reserve the right to cancel payment on a money order and recover money from the recipient if the check turns out to be counterfeit or fraudulent. In most areas, there is a deadline to do so, usually somewhere up to two weeks. This can cause confusion, as the bank may tell the recipient that the draft has cleared shortly after they pay it, and then come back later to say it’s been found to be counterfeit. Therefore, some people who accept money orders as a means of paying for mail-order products may insist on waiting until the time for a check to be declared counterfeit has elapsed before shipping the products.
Smart Asset.
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