A bank draft is a financial instrument issued by a bank on behalf of a customer, guaranteeing a specified sum of money to a designated payee. It is also known by various names, including a banker’s draft, bank check, or cashier’s check. A bank draft is considered a secure form of payment because the funds are guaranteed by the issuing bank.

Here are key features and aspects related to bank drafts:

1. **Issuance Process:**
– To obtain a bank draft, a customer typically approaches their bank and provides instructions to issue a draft for a specific amount. The bank then withdraws the specified amount from the customer’s account and sets aside the funds to cover the draft.

2. **Payee Designation:**
– The bank draft is made payable to a specific payee or beneficiary, and this information is usually specified on the face of the draft. The payee is the individual or entity entitled to receive the funds.

3. **Secure Payment Method:**
– A bank draft is considered a secure form of payment because it is backed by the issuing bank. The funds are set aside by the bank, making it less susceptible to fraud compared to personal checks.

4. **Prepayment Requirement:**
– Customers are generally required to prepay the full amount of the bank draft, ensuring that the funds are available and reserved by the bank.

5. **Use in Large Transactions:**
– Bank drafts are often used in large transactions where the payee may prefer a more secure and guaranteed form of payment than a personal check.

6. **International Transactions:**
– Bank drafts can be used for international transactions, providing a secure and widely accepted method of payment. In such cases, the bank draft may be denominated in a major currency.

7. **Bank Draft vs. Certified Check:**
– While both bank drafts and certified checks are secure payment methods, there are differences. A certified check is a personal check that the bank has verified, whereas a bank draft is drawn on the bank’s funds rather than the customer’s account.

8. **Verification Process:**
– When a payee receives a bank draft, they can verify its authenticity by contacting the issuing bank directly. The issuing bank can confirm whether the draft is legitimate and whether funds are available to cover it.

9. **Fees and Charges:**
– Banks may charge a fee for issuing a bank draft. The fee can vary depending on the bank’s policies and the amount of the draft.

10. **Expiration and Stale-Dated Drafts:**
– Bank drafts may have an expiration date, and if not presented for payment within a certain period, they may be considered stale-dated. The payee may need to obtain a new draft if the original has expired.

11. **Lost or Stolen Drafts:**
– If a bank draft is lost or stolen, the customer can usually request a stop payment or replacement from the issuing bank, but this process may involve additional fees.

Bank drafts are commonly used in real estate transactions, for making large purchases, and in situations where the payee requires a secure and guaranteed form of payment. The use of bank drafts provides a level of assurance to the payee that the funds are available and will be honored by the issuing bank.