Bank Draft vs Certified Cheque

Difference Between Bank Draft vs Certified Cheque

A Bank Draft is a mode of payment wherein the issuing bank guarantees the payment of the amount on behalf of the payer. In order to request a Bank draft from the Bank, the payer has to have an account with that bank. Then once the bank received the request, they usually review the account details of the payer to check whether it has sufficient funds or not. 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 cheque since the bank itself is checking and guarantying 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 has 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 between Bank Draft vs Certified Cheque:

As discussed earlier, both bank draft vs certified cheque is used to transfer funds to the payee when the amount in bigger, both the parties only have a professional relationship and safety of the funds is a priority for both of them.
Using any of these two methods for fund transference will limit the risk of cheque or draft getting bounced since they are backed and guaranteed by the respective banks.
Both bank draft vs certified cheque cannot be cancelled or stopped. In both the cases, first, the amount gets blocked/set aside by the bank and then transferred to the payee. So it means that the transaction was 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.
Although in both the cases, usually bank 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 payer has withdrawn the money afterwards (very rare case). In the case of Bank draft, it is the responsibility of the bank that the payee should receive the money, so they will keep aside the funds from the account.
In the case of 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 bank draft, a bank will make that draft on behalf of payer and also guarantees the payment.