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Bank Drafts in Canada - What You Need to Know

Written by Jessica Steer
When making large purchases, cash isn’t always the ideal option. Not only is a large amount of cash bulky and hard to carry, but it’s also not very discreet. If you’re making a large purchase, though, what’s the ideal alternative?
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    When it comes to ideal ways to make large purchases, you can write a cheque, e-transfer, or a bank draft. These are also more secure options for gifting money, especially if you have to send the money through the mail. If the purchase or money you want to send is over $3,000, a bank draft is one of the most common choices. 

    How a Bank Draft Works

    In Canada, bank drafts are similar to cheques, but the issuing bank guarantees the amount on the bank draft. When you go to your financial institution and request a bank draft, the funds are automatically taken out of your bank account and put into the bank’s reserve account until the receiver deposits the funds and they’re transferred. This is different from a cheque, where the funds aren’t taken from your bank account until the cheque has been deposited. This means there’s no guarantee that the funds will be in the account, unlike with a bank draft. Bank drafts provide security to the payee and are simple for the payer to obtain. Plus, you can get them in a foreign currency if needed. 

    Bank Drafts and Alternatives

    While we’ve already gone over what bank drafts are, let’s take a look at some bank draft alternatives that are still similar to bank drafts. 

    1. Wire Transfer: A wire transfer is a way to send money electronically through a bank or other transfer service agency. There are often low fees associated with wire transfers, and the money can be sent anywhere in the world. These are also referred to as international money transfers. 
    2. Money Order: A money order is similar to a bank draft. Just like a bank draft, the funds are secured from your account. The main difference between a bank draft and a money order is that you can cancel a money order before it’s been cashed, but you can’t cancel a bank draft once it’s been issued. They can also be purchased through a Canada Post post office. 
    3. Certified Cheque: Certified cheques and bank drafts are similar in the fact that they’re both guaranteed. The difference is that a certified cheque is a type of personal cheque that’s certified by the bank and requires the payer’s signature.  
    4. Interac E-transfer: E-transfer is an easy way to send money throughout Canada. That said, you can’t cancel an e-transfer once it’s been accepted, and there’s a daily sending limit of $3,000 on e-transfer transactions, making it not ideal for really large transactions. 

    Depending on the size of the transaction you’re making, these options are just as secure as a bank draft. That said, there’s no guarantee with any option; you just want to choose the most secure option based on your circumstances. 

    Getting a Bank Draft in Canada

    In order to get a bank draft in Canada, it’s actually pretty simple. All you have to do is go to your bank or financial institution and request one for a specific amount. When you request the bank draft, the intended recipient's information will be added to the draft as they’re the only one who can deposit it. 

    Once you’ve requested the bank draft, the funds will be secured and withdrawn from your account. You'll also be charged a fee of around $9.95 per each draft you request. This amount could vary depending on your financial institution. You may be wondering, can bank drafts be free? Well, some financial institutions will offer free bank drafts depending on the banking packages they offer. 

    How Long It Takes to Get a Bank Draft

    Once you go to your financial institution and request a bank draft, you can get it the same day. When you request your bank draft, though, you need to be sure you know the information of the recipient. This is the information required to complete the draft and have the funds immediately withdrawn from your bank account. 

    When Bank Drafts Can Be Deposited

    You can cash a bank draft immediately after it’s been processed. That said, the funds won’t be deposited into your bank account immediately. Due to the fact your bank secures the funds, it will take some time to verify that the funds will be deposited into the correct account. That said, the funds are guaranteed by the issuer, so the wait time isn’t as long as it would be with a traditional cheque. 

    Once the payee deposits the bank draft, it can take up to 24 hours until the bank draft clears and the funds are deposited into the account. This may take longer than an e-transfer for small amounts of money, but for large funds, it’s one of the faster ways to transfer your funds safely. 

    What Bank Drafts Look Like

    Bank drafts in Canada can look similar to personal cheques. That said, though, it’s important to remember that every financial institution’s bank draft will look different. They’ll have their own paper and paper. 

    However, no matter where you get your bank draft from, they’ll all include the same information. 

    • The issuer's name
    • The amount of the bank draft 
    • The date it was issued
    • The information of the receiver

    It may even have the issuing financial institution's information as well. 

    Here’s an example of what your bank draft could look like. 

    Bank draft example

    Bank Drafts vs Certified Cheques

    As we already mentioned, bank drafts and certified cheques are similar. Both of these methods of payment verify that the funds are in the account before they’re issued. That said, there are some differences. With bank drafts, the bank withdraws the funds from the payer’s account and puts them into the bank's reserve account, also referred to as an internal account.  It’s then issued when the bank draft is cashed. With a certified cheque, the funds are held, but they aren’t removed from the issuer’s bank account until the certified cheque is cashed. Neither of them can be cancelled once they’ve been issued, though. They’re both good options for big-ticket purchases. 

    Bank Drafts vs Cheque

    With bank drafts and regular cheques, there are a few more differences than with a certified cheque. As we know, with bank drafts, the money is removed from the account when it’s issued and will be deposited into the receiver account when it’s deposited. A standard personal cheque is linked to your chequing account, but there’s no way to verify there’s any money in the account. The receiver won’t know if the payer has sufficient funds until they try to deposit the cheque. If the payer has insufficient funds, then the cheque could bounce. If this happens, the receiver won’t receive their payment. This makes bank drafts an ideal option for large purchases. 

    Depositing a Bank Draft in Canada

    Depositing a bank draft in your account is relatively simple. As the payee, you take the draft to your bank or credit union, and the funds will be deposited into your account. Depending on the size of the draft, you may be able to deposit using online banking. That said, though, since bank drafts are normally used for large sums of money, they’re usually done in person and can take 1 to 2 business days to appear in your account. 

    Pros and Cons of Bank Drafts

    While bank drafts are a popular form of making large payments, there are some pros and cons you should consider before deciding if you’d like to use a bank draft. Let’s take a look at some bank draft pros and cons. 


    When deciding whether or not to use a bank draft, one of the key things to consider is that a bank draft offers guaranteed funds. This is a preferred form of payment for payees since it’s easiest to transfer and one of the most secure methods. It’s also simple to get. 


    Even though bank drafts are secure, there are some disadvantages to them. The main disadvantage of a bank draft is that you can’t cancel them. Once the bank draft has been issued, the funds have been considered paid. This is unfortunate if you end up losing the draft, which can happen. It’s also important to look out for fake bank drafts because that can happen as well. Another downside to consider with a bank draft is it costs money to you as the issuer. How much a bank draft costs depends on your financial institution. 

    Holds on Bank Drafts

    You may think that holds are only put on standard cheques to verify the funds before the money is deposited. That’s not always the case, though. Many financial institutions will choose to hold bank drafts and certified cheques for anywhere from 1 to 4 days. This is because bank drafts and certified cheques can be frauded. When you’re dealing with large sums of money, it’s important to verify the funds exist before depositing them. If you’ve received a deposit from the issuer before, the financial institution will be less likely to put a hold on the draft. 

    Final Thoughts

    In Canada, there are a few different options you have when making large purchases. Besides using cash, one of the most secure forms of payment is a bank draft. You can get bank drafts at your financial institution, and they’re a common way to purchase vehicles, put a down payment on a home, or even just give money. You may even receive one in a legal settlement.

    A bank draft isn’t your only option, though. Other methods that are considered a guaranteed form of payment,  more secure than a standard cheque, are certified cheques and money orders. There are differences between each of these different methods, but they all have some pros and cons. With that in mind, one of the largest drawbacks when using a bank draft is that it can’t be cancelled. Neither can certified cheques, for that matter, but money orders can be cancelled as long as they haven't been deposited. Overall, though, if you’re looking to not withdraw cash for your purchase and you can’t use your debit card, a bank draft is a good alternative. 

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