A bank draft is a payment that is guaranteed by the issuing bank, similar to a check. It is often used for larger payments, such as a down payment on a home, and provides the payee with a more secure form of payment than personal checks. When a bank draft is requested, the bank verifies and withdraws funds from the payers account and deposits them into an internal account, or a reserve account. The bank then prepares the draft with the payers name and the amount being paid to the payee. The draft has a serial number, watermarks, and may even have micro-encoding that identifies it as a legitimate form of payment.

Bank drafts are also known as bankers drafts, bank checks, or tellers checks. They are often used for major purchases, such as property, and are a guarantee that the payee will receive the specified amount on presenting the draft. Bank drafts are safer than personal checks because they are guaranteed by the bank, and the payee is guaranteed the availability of funds. However, if a bank draft is lost, stolen, or altered, and the funds are cashed out by the wrong person, the bank is not responsible for replacing the lost money.

To obtain a bank draft, the individual making the payment submits a request to their financial institution, and the bank reviews the individuals account to see if they have sufficient funds to transfer. The bank draft is then issued in the form of a document and is drafted in the name of the individual who will be depositing it and receiving the money. The individual purchasing the bank draft is responsible for ensuring that the bank draft is delivered to the payee.

In summary, a bank draft is a payment that is guaranteed by the issuing bank and is often used for larger payments. It provides the payee with a more secure form of payment than personal checks and is safer because it is guaranteed by the bank. However, if a bank draft is lost, stolen, or altered, the bank is not responsible for replacing the lost money.