Q:

What is a banker's draft, and how does it work?

A:

Quick Answer

A banker's draft is a check that is guaranteed by the bank to clear. To ensure that the check will clear, the bank effectively sets aside the funds in the issuer's account so they are not used for any other payments.

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What is a banker's draft, and how does it work?
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Full Answer

In the United States, a banker's draft is typically referred to as a cashier's check. Banks only issue cashier's checks to customers who have enough cash in their account to cover them or to customers who have cash to pay for the cashier's check.

In exchange for the payment, the bank gives the customer a paper cashier's check, and the bank prints the name of the check recipient and the amount on the check. Cashier's checks look different than regular checks so the recipient knows he is receiving guaranteed funds.

Many banks are willing to offer banker's drafts or cashier's checks to people who are not their customers. These checks can be bought over the counter of a bank for a small fee, but they must be purchased in cash. Because the funds are verified, banks are not willing to accept an unverified payment like a check from another account.

A money order is another type of verified payment. It is similar to a cashier's check. Money orders can be purchased at grocery stores, post offices or money stores.

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Related Questions

  • Q:

    What is the difference between a bank draft and a check?

    A:

    A bank draft offers guaranteed funding, as the institution issuing it has already collected money to cover its value, while a check draws funds from an individual's account. Unless the purchaser of the bank draft asks the bank to stop payment, the bank pays it; however, banks sometimes return checks due to insufficient funds in the account, according to About.com.

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  • Q:

    How do you deposit a money order into a bank account?

    A:

    Deposit a money order to an existing bank account the same way as a normal check. If the money order is made out to you, simply sign it and bring it to your bank to deposit it.

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  • Q:

    How long can a bank hold a check before you can draw on it?

    A:

    The length of time a bank can withhold the availability of funds from a check depends on the type of check, the amount of time the account has been active, the amount of money for which the check is written and the bank's availability policy. Certain types of checks, including United States Treasury checks and government checks, must be made available to the customer on the business day following the deposit, according to the Federal Reserve Board.

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  • Q:

    How do you find the money transfer number of your bank?

    A:

    The money transfer number of a bank, or routing number, is the nine-digit sequence of numbers located at the bottom left hand corner of a customer's check or deposit slip, explains Regions Bank. Customer service representatives can provide the routing number, according to Bank of America. A customer can also obtain the number by signing on to online banking under his account's information and services tab. Banks use different routing numbers in each state.

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