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It can be troublesome when you deposit a cheque and find out shortly after that it has bounced. That’s the gamble of dealing with personal cheques. And while you could always work with cash or an e-Transfer instead, these might not always be the best ways to exchange funds when you’re dealing with large sums of money. 

In these cases, you’ll want a more secure form of payment that will be available as promised, such as bank drafts and certified cheques. So, what’s the difference between the two? Which one should you use when you want to send a significant amount of money?

Let’s take a closer look at a bank draft vs certified cheque to help you understand how they work and why they’re ideal when transferring and receiving sizable funds.   

Bank Draft vs. Certified Cheque

A financial institution is involved in the process of issuing a bank draft and a certified cheque, but there are some key differences between the two. In either case, the goal is to ensure that the funds are readily available before a large money transfer is made. 

What Is A Bank Draft? 

A bank draft is a payment tool used to make large payments without having to withdraw cash from your bank account. It looks somewhat like a traditional personal cheque, except that it carries a guarantee. That means when you send or receive a bank draft, you’ll know that the money is available. 

This is unlike a regular cheque, which comes with the risk that it may bounce due to insufficient funds in the sender’s account. For this reason, you can treat a bank draft as a secure form of cash. 

How Does It Work? 

Your bank will serve as the middleman between you and the recipient. Upon your request and instruction, the bank will issue a bank draft with a specific dollar amount, only after verifying that the funds are readily available in the specified account. Then, the bank will put aside the draft amount from your account. Once the recipient deposits the draft, the process is complete.

What Is A Certified Cheque? 

A certified cheque is a personal cheque that has been certified by the financial institution. It is considered a guaranteed form of payment, which means the cheque won’t bounce due to insufficient funds when it is cashed. Certified cheques essentially hold or freeze your funds in your bank account until the cheque is deposited.

How Does It Work? 

With a certified cheque, you’re the issuer who orders the bank to certify it before giving it to the recipient. The bank serves as the intermediary between you and the payee, similar to the process with a bank draft. 

In the case of a certified cheque, the bank will verify if you have enough money in your account to cover the cheque. Once the bank employee confirms sufficient funds, the certified cheque is processed, and the funds are put on hold in your account once the cheque is certified. 

Differences Between A Bank Draft vs. Certified Cheque

The following chart provides a side-by-side comparison of bank drafts vs certified cheques:

Bank DraftCertified Cheque
When are funds deposited?Money is withdrawn from your bank account and transferred immediately to the recipient once the bank draft is deposited.Money is put on hold in your bank account until the cheque is deposited by the recipient 
How is it used?Used to transfer money directly between bank accountsUsed to transfer money directly between a bank account to another person or business
FeesSmall convenience fee is charged by the bankSmall convenience fee is charged by the bank
How it’s performedCan be obtained as a paper draft or performed onlineAvailable as a physical cheque obtained in person from a bank 
Who issues it?Banks issue bank drafts as per customer request, then the bank transfers the money to the recipient’s bank accountCustomers issue certified cheques and order banks to pay a specific individual or business on the cheque.
Signature required? No, however, a bank employee may sign it to make the draft more secureYes, the customer’s signature is required, along with the bank’s certification with the word “certified” stamped beside the signature.
Can it be stopped?Only if lost or destroyed Payment cannot be stopped once the cheque is issued 
Are funds guaranteed?YesYes

Bank Draft vs. Certified Cheque vs. Money Order

Now that you know the similarities and differences between a bank draft vs a certified cheque, how do these forms of secured payments differ from a money order?

  • Bank Draft – As mentioned, a bank draft is issued by a financial institution on behalf of a customer to transfer funds from one bank account to another. The funds are immediately withdrawn once the draft is created. The money is transferred into the recipient’s account once the draft is deposited. 
  • Certified Cheques – These are similar to bank drafts in that they also carry a guarantee that the funds will be available when the cheque is deposited. But rather than the funds being instantly withdrawn, as is the case with a bank draft, the money is set held or frozen until the recipient deposits the cheque. Further, the customer issues the cheque and orders the bank to pay the recipient.
  • A Money Order – A money order can be created through financial institutions or Canada Post. It is a certificate that allows the recipient to receive funds on demand up to $999.99. Payment is promised on the date specified on the money order.

With all three financial instruments, the bank acts as an intermediary and guarantees that the funds are available before they’re issued.

Benefits of Bank Drafts vs. Certified Cheques 

Bank drafts and certified cheques are great options if you’re looking to securely send money to another person or business. If you’re on the receiving end of a bank draft or certified cheque. You have peace of mind knowing that the funds will be available when you deposit the draft or cheque. Without the hassle of dealing with insufficient funds. 

Let’s take a look at some of the perks that come with bank drafts and certified cheques.

Bank Draft Benefits 

  • No limit. As long as the money is available in your account, there’s no limit to how much money you choose to send via bank draft. In fact, bank drafts are commonly used to make large purchases, such as cars, houses, or business services. 
  • Secure. Bank drafts are guaranteed and issued by a financial institution. This means the money is guaranteed to be available when the recipient deposits the draft. As such, bank drafts are much more secure and reliable than a traditional personal cheque. 

Certified Cheque Benefits

  • Guaranteed availability of funds. Like a bank draft, a certified cheque comes with the guarantee that the money will be available when the recipient deposits the cheque. 
  • No fees are required. The security that comes with bank certification helps to avoid unnecessary fees that may apply in the case of a bounced non-certified cheque.

Bank Draft vs. Certified Cheque Fees

Banks charge a fee to process bank drafts and certified cheques. However, the fees associated with certified cheques tend to be higher. That’s because certified cheques require a signature, approval, and certification from a bank employee.  

Bank draft fees can be as high as $9.95. But if you have a premium account, you may be able to have the fee waived. For certified cheques, the fee can be as high as $20. Depending on the amount on the cheque and the bank certifying it.

How To Choose Between A Bank Draft vs. Certified Cheque

Bank drafts and certified cheques can be used when you want to ensure that the dollar amount specified is available to be transferred into the recipient’s account. These financial instruments are alternative payment forms. And are more secure and feasible than cash or traditional personal cheques.

Final Thoughts

Bank draft vs. certified cheque, which is the right option for your needs? Both are ideal methods of sending and receiving a significant amount of money. They’re more secure than a big stash of cash, and they provide assurance that the money is available, unlike personal cheques. Consider either option when working with a significant amount of money. 

FAQs Bank Draft vs. Certified Cheque

What’s the difference between a bank draft and a cashier’s cheque?

A bank draft comes from the sender’s funds, whereas a cashier’s cheque comes from the financial institution’s funds. Then, the payer would pay back the bank, along with a fee.

Can I cancel a bank draft?

Yes, a bank draft can be cancelled. To do this, you’ll need to bring both parts of the draft to the bank. A bank draft will also be stopped if it is lost or destroyed.

What happens if the recipient loses the bank draft?

If a bank draft is lost, the funds will not be deposited into the recipient’s account. If you are the sender of the lost draft. You can take the non-negotiable component of the draft to your bank to verify whether or not the money has been deposited. You can request a new bank draft from your bank.  Keep in mind that if the recipient finds the original bank draft, they can deposit the money, even if you provide a replacement draft.
Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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