Bank Draft

A bank draft is a written order in the form of a check instructing the payment of money from one bank account to another. The bank draft is drawn by one bank against funds that it has deposited in an account at a second bank. The first bank is giving its consent for the second bank to release funds or make payment to the individual named on the bank draft. A bank draft is usually more acceptable to a payee than a personal check. Other terms for bank draft are draft, bill of exchange, order of payment, banker’s draft and negotiable instrument. A bank draft is similar in form to the common bank check. Frequently, a bank draft is used to transfer funds and to settle outstanding balances between banks.