Difference Between Bank Draft and Certified Cheque

Bank Draft vs Certified Cheque
 

Bank draft and certified cheque are among the different services banks offer to their customers, as such it is beneficial to know the difference between bank draft and certified cheque. More specifically, bank drafts and certified cheques are both payment mechanisms that are made available to bank customers. Both bank drafts and certified cheques can be used in the payment for goods and services. While a certified cheque is drawn up by the account holder, a bank draft is drawn up and issued by the bank. Despite their similarities in use, there are a few differences between bank draft and certified cheque. The article offers a clear overview of each payment instrument and explains the similarities and differences between a bank draft and a certified cheque.

What is a Certified Cheque?

Certified cheque is a type of payment facility made available by banks to its customers to make payments for goods and services. A certified cheque is drawn up by the account holder, also known as the drawer of the cheque. Certified checks are quite similar to traditional cheques except for one important fact that in certified checks, the bank guarantees that sufficient funds are held in the drawer’s account to make the payment. The certification process occurs when a bank employee verifies that funds are available to make payment, sets the said funds aside and then certifies/signs that the funds are available.

Certified Cheque

What is a Bank Draft?

A bank draft is a payment instrument that can be used to make payments for goods and services. The bank issues the bank draft on behalf of the account holder, therefore drawer of a bank draft is the customer’s bank. The account holder who requests a bank draft to be drawn up is known as the drawee and the party receiving payment is known as the payee. One issue with a bank draft is that it typically does not require a signature which leaves the possibility for fraud. This problem can be rectified through the use of a certified bank draft which is signed and certified by a bank official.

Difference Between Bank Draft and Certified Cheque

What is the difference between bank draft and certified cheque?

Bank drafts and certified checks are both payment options and services that are offered by banks to their customers. A certified cheque is drawn up by the account holder, whereas the issuing bank draws a bank draft. Certified cheques and bank drafts require bank officials to make sure that sufficient funds are available in the account holder’s bank account prior to certifying the cheque. Since a certified check is guaranteed, banks charge a higher fee to issue a certified cheque over a bank draft. However, a customer can also request for a certified bank draft which is signed by a bank official which will then serve to guarantee payment. A certified cheque guarantees that payment will be made; this means that it is not possible to stop payment on a certified cheque. However, this is not the case with bank drafts where payments can be halted or stopped altogether in the case of fraud.

Summary:

Bank Draft vs Certified Cheque

• Bank drafts and certified cheques are both payment options and services that are offered by banks to their customers.

• A certified cheque is drawn up by the account holder, whereas the issuing bank draws a bank draft.

• Certified cheques and bank drafts require bank officials to make sure that sufficient funds are available in the account holder’s bank account prior to certifying the cheque.

• Since a certified check is guaranteed, banks charge a higher fee to issue a certified cheque over a bank draft.

• A certified cheque guarantees that payment will be made; this means that it is not possible to stop payment on a certified cheque. However, this is not the case with bank drafts where payments can be halted or stopped altogether in the case of fraud.

 

Photos By: Cheon Fong Liew (CC BY-SA 2.0)

Further Reading:
  1. Difference Between Bank Draft and Cheque