Definition of Bank draft:
Bill of exchange drawn by a bank on itself, or on a correspondent bank in another city or country. Bank drafts are commonly used by banks in dealings with other banks, or when a creditor or seller is unwilling to accept an ordinary check from a debtor or buyer in another city or country. (In local transactions a certified check or a cashiers check serves the same purpose.) When a customer (the drawer) requests a draft, the bank withdraws the amount of the draft from his or her account and holds it to honor the draft on its presentment by the drawee. Because, in normal circumstances, a draft is certain to be paid, it is generally accepted as a cash equivalent. Also called bankers draft.
The term bank draft refers to 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amount of the draft is drawn from the requesting payer's account—their bank account balance decreases by the money withdrawn from the account—and is usually held in a general ledger account until the draft is cashed by the payee.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.
A check drawn by a bank on its own funds in another bank.
Consumers have several avenues available when they need secure, certified payment options. They may require them to secure an apartment or for a deposit for a very large purchase. Certified payment options give the payee security, knowing that the funds are available. These options include certified checks, wire transfers, and bank drafts.
How to use Bank draft in a sentence?
- The bank draft was issued and we were then able to move forward in the process of finalizing the new deal.
- He gave the PCEC a copy of a bank draft to prove it.
- If two banks are making a deal between each other instead of exchanging cash it is easier to use a bank draft .
- A bank draft is a negotiable instrument where payment is guaranteed by the issuing bank.
- I have never done a bank draft before, so I made sure to call my bank and ask them how it all worked.
- Banks verify and withdraw funds from the requester's account and deposit them into an internal account to cover the amount of the draft.
- Banks normally charge a fee for a bank draft.
- A seller may require a bank draft when they have no relationship with the buyer.
Meaning of Bank draft & Bank draft Definition