Knowing how to cash a bank draft in Canada is vital for business owners and service providers. Sometimes the client could suggest using this payment method instead of a money order or a cheque.
The process of cashing a bank draft in Canada is somewhat similar to that of cheques. Once you receive the payment document from the payer, you will sign it and enter your account number. You should then deposit it to your bank, which will deposit the money into your account.
A bank draft is a payment document that allows individuals and businesses to make huge payments without drawing cash from accounts. The bank draft looks like a cheque, but it guarantees the receiver that the funds are available.
Bank drafts cannot bounce, but the payer can cancel the transactions. Also, you can transact money in various currencies using the payment method. Once you receive a bank draft, you should deposit it to your bank and wait for the funds to be deposited into your account.
If you plan to use a bank draft to make payments, you can get it from your preferred financial institution. You will first request the bank draft at your bank, which will check if you have enough cash in your account.
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Once the request goes through, the bank draws money from your account and transfers it into the bank’s reserve account. You will then get the document to write to the person you are paying the money to.
When the payee presents the bank draft to their financial institution, the bank will verify their identity as indicated in the payment document. It could take 1-4 days for the bank to deposit the money in the account.
A bank draft is a safe payment method, like Interac e-transfers and cheques. Only the payee whose name appears on the payment document can cash the bank draft.
However, if the bank draft gets lost and lands in the wrong hands, the payer could lose their money. Someone else can change the payee’s details and cash it, meaning that money will be deposited into their account.
Unfortunately, the bank won’t refund lost money cashed by the wrong bank draft recipient. The payer must therefore ensure they deliver the payment document to the payee, who should keep it safe.
Canceling a bank draft is not easy because the process has already removed the funds from your account and into the bank’s reserve. However, you can cancel the bank draft if the receiver has not cashed out the money yet.
Canceling a bank draft is advisable if the document gets destroyed or lost. If it lands in the wrong hands, the person can change the details and withdraw the money.
Once you cancel the original bank draft, you must get a new one to give to the seller. Withdrawing is only possible if the money has not been cashed out yet. Also, note that money will be deposited into your account, so you will buy a new bank draft.
Some sellers prefer bank drafts to money orders and cheques. First, although cashing out a bank draft can be complicated, it is safer to use. Some of the advantages of using bank drafts are;
The main difference between money orders and bank drafts is the guarantee of getting cash. Money orders and cheques can bounce if the writer does not have enough cash in their account.
However, to get a bank draft, the bank first draws money from your account and puts it into a separate account. Once the payee presents the bank draft, the bank will deposit the reserved funds into their account.
There is no maximum amount to transfer using a bank draft. This differs from money orders and e-transfers which you cannot transact over 10,000 Canadian dollars. Besides, you can send money in any currency using bank drafts.
Carrying large sums of cash is unsafe because cash is untraceable once it gets lost. Besides, you can get mugged and lose all your money. On the other hand, bank drafts are more convenient because you carry a lump sum in a small document.
Besides, if you lose the bank draft, you can cancel it and get another one before it lands in the wrong hands. Also, bank drafts do not require the recipient’s details like their bank account.
While you will enjoy transacting lump sums using a bank draft, this payment method has some limitations. Some of them are;
Once the wrong person cashes out a bank draft, you cannot cancel it. Otherwise, you can lose a large sum of money if the bank draft lands in the wrong hands.
Like e-transfers, bank drafts are also subject to fraud. You could receive a counterfeit bank draft from a buyer. You could also lose money if you lose the bank draft. Banks don’t refund money lost due to fraud.
Once a buyer presents a bank draft as a mode of payment, you will sign it and deposit it to the bank account. You can add ‘for deposits only’ on the bank draft for more security. The bank will go through the draft to verify its legitimacy.
It takes 1-4 days for the bank to deposit the money into your account. However, to ensure you take the least time possible, deposit the bank draft to the teller instead of taking it to an ATM.
A bank draft is not the only payment method. If you have had bad experiences and would like better money transfer methods, you can use;
Most people are moving to electronic money transfer methods because they are quick and convenient. You don’t need to make long bank queues to access your cash. Interac e-transfer allows customers to transact from the comfort of their homes.
You need a phone or computer and a good internet connection to carry out an Interac e-transfer. For safety, don’t use public Wi-Fi or a hotspot. Cybercriminals know how to access people’s data when using public Wi-Fi.
Wire transfer is another electronic money transfer method that allows users to transfer money from one bank to another. You must have the recipient’s bank information, including their name, address, and bank account number.
Wire transfer is a perfect money transfer method if you are sending money abroad. However, it charges the users a fee for transacting.
A money order is similar to bank drafts, but you don’t require a bank account to use it. You can buy goods and services using this means of payment. However, unlike bank drafts, you can only send a maximum of $999.99, making it unsuitable for transacting large amounts of money.
Before accepting a payment method, learn how to cash a bank draft in Canada. The money transfer method is safe and convenient. The advantage you get from using it is transacting large amounts of money without limits.
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