Bank Draft vs Certified Cheque

Difference Between Bank Draft vs Certified Cheque

A Bank Draft is a payment mode wherein the issuing bank guarantees the payment of the amount on behalf of the payer. To request a Bank draft from the Bank, the payer must have an account with that bank. Once the bank received the request, they usually review the payer’s account details to check whether it has sufficient funds. A certified check is a cheque signed by the payer and guaranteed by the bank that in payer has sufficient balance in the account to cover the amount. It is a safer version of regular cheques since the bank itself checks and guarantees the availability of the funds.

Bank Draft

The bank will freeze an amount from the account so that the payer cannot use that amount, and the amount payable to the payee is secured. Then after that, they issue the bank draft. Once the bank draft is issued, it is not possible to cancel the draft. This is simply because the transaction had already occurred earlier when that amount was set aside from the payer’s account. It can only be canceled in case it has been lost or destroyed or stolen.

Certified Cheque

In the case of certified cheques, most of the time but not always, banks set aside the stipulated amount. Similar to the bank draft, once issued, this cheque cannot be reversed or stopped.

Head to Head Comparison between Bank Draft vs Certified Cheque (Infographics)

Below is the top 5 difference between Bank Draft vs Certified Cheque

Key Differences between Bank Draft vs Certified Cheque

Let us discuss some of the major differences :

1. As discussed earlier, both bank draft vs certified cheque is used to transfer funds to the payee when the amount is larger. Both the parties only have a professional relationship, and the funds’ safety is a priority for both of them.
2. Using any of these two fund transference methods will limit the risk of cheques or drafts getting bounced since they are backed and guaranteed by the respective banks.
3. Both bank draft vs certified cheques cannot be canceled or stopped. In both cases, first, the amount gets blocked/set aside by the bank and then transferred to the payee. So it means that the transaction already occurred at the time when the bank allocated that funds. So once written, they cannot be taken back unless there are some unprecedented circumstances.
4. Although in both cases, banks usually keep aside the stipulated amount, sometimes, banks do not perform this step in case of a certified cheque. When the payer writes the certified cheque, the bank will review the balance and gives the green signal if funds are sufficient. They will not keep aside the money, and it can happen that the payer has withdrawn the money afterward (a very rare case). In the Bank draft case, it is the bank’s responsibility that the payee should receive the money to keep aside the funds from the account.
5. In the case of a certified cheque, it is written by the payer and backed by the bank. Bank will not write that on behalf of a payer. But for a bank draft, a bank will make that draft on behalf of the payer and also guarantees the payment.

Bank Draft vs Certified Cheque Comparison Table

Let’s look at the top 5 Comparisons between Bank Draft vs Certified Cheque.

Bank Draft	Certified Cheque
It is a secure medium to pay the payer since the bank guarantees the payment.	It is a secure medium to pay the payer since the bank guarantees the payment.
The payer should have an account in the issuing bank and balance the account to cover the amount of the draft.	The payer should have an account in the bank, which gives the guarantee, and should have a balance in the account to cover the amount of draft.
Issuing banks keep aside the stipulated amount so that the payment is secured.	Issuing banks usually, but not always, keep aside the stipulated amount so that the payment is secured
Once issued, it cannot be reversed except for some exceptional circumstances.	Once issued, it cannot be reversed except for some exceptional circumstances.
The bank writes it on behalf of the payer.	It is written and signed by the payer but certified by the bank.

Conclusion

In terms of functioning and operating, both bank drafts vs certified cheques work similarly. These two instruments’ main goal is to give additional comfort and reassurance to the person who will receive that the payment and is rest assured that the payment will be honored. Although these two have some small dissimilarities among themselves, they are more similar branches of the same tree.

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