A banker’s draft is a bit like a cheque, but the main difference is that it is prepaid and issued by a bank, rather than you writing it yourself.
Essentially, you give the bank a sum of money and they provide you with a draft for that amount, which you then give to the person or organisation you’re paying.
Here, we explain how they work, and when you’re likely to use one.
How does a banker’s draft work?
As mentioned above, if you want to use a banker’s draft to pay for something, you must request one from your bank. You must notify your bank how much you want the draft to be for, and who the named payee is. Only they will be able to use the draft.
The money will be taken from your bank account once it’s been signed by a member of staff from the bank. You’ll usually be asked to provide two forms of identification before the bank will provide you with a banker’s draft. Some banks don’t impose a fee for a banker’s drafts, but others do, with these charges typically costing around £15 per draft.
When are you likely to use a banker’s draft?
A banker’s draft may be used if you’re transferring a large sum of money to someone, and they won’t accept another form of payment, such as a bank transfer.
Some organisations or individuals see them as more secure than a personal cheque, because the funds have already been issued, so there is no chance of the payment ‘bouncing’.
What happens if I lose a banker’s draft?
If you lose a banker’s draft your bank has drafted for you, get in touch with your bank as soon as possible and request that it is cancelled. You can then ask if they can provide you with a refund so you can arrange a new draft.
Bear in mind that if someone has already used the draft fraudulently, you could lose the amount the draft was for.
If the bank refuses to help, or holds you liable for losses and you consider this unfair, you should lodge an official complaint with them. If you’re not satisfied with their response or they fail to sort out the issue, you can take your complaint to the Financial Ombudsman to look into. Find out more about making a complaint in our guide How to complain about a financial company.
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