When it comes to sending money, what’s the first thing that comes to mind? It might be electronic transfers, right? Well, that’s one of the most common methods for moving money from one account to another. But it’s not the only or the safest one out there.

Bank drafts are another option, although they’re more formal and not well known to the general public. However, they’re essential in certain transactions where financial backing is a must.

So, today’s topic focuses on what a bank draft is, how it works, and how it differs from transfers.

Bank draft: definition, how it works, and differences from transfers

What is a bank draft?

It is a payment instrument used to send money to another person. It’s also known as a cashier’s check, since it is issued in paper form.

Bank drafts offer a high level of security for both parties involved. That’s why they’re still used in important transactions or between people who don’t know each other well.

However, due to their similarity with traditional checks, many people are unfamiliar with them. Especially because in today’s world, faster and more accessible methods like bank transfers are usually preferred.

As a result, bank drafts are now mostly limited to contexts where more formality is required, much like postal money orders.

How does a bank draft work?

It all starts when a person or company asks their bank to issue a payment document in favor of a third party.

For this, you need to provide the full details of the sender and the beneficiary, and the amount to be sent. You may also need to include the recipient bank’s details, where the draft will be cashed.

Once the availability of funds is verified, the issuing bank generates a cashier’s check with the corresponding backing. This ensures that the money is reserved exclusively for that payment.

It’s worth noting that a bank draft acts as an irrevocable payment order. It can also be delivered in person to the beneficiary or sent through other means as agreed.

How do you cash a bank draft?

The recipient must present the document at their bank. From there, the institution will validate the draft and process the deposit of the corresponding amount. This process can take a few business days depending on the institutions involved.

Bank draft: Features

To better understand what a bank draft is, here are the main features you should know:

• It’s issued by a financial institution, which assumes the payment commitment instead of the account holder. This ensures fund availability.

• It is presented as a cashier’s check with the sender, beneficiary, amount, and paying bank listed.

• The money is reserved from the moment it’s issued.

• It’s often used in the purchase of goods, legal procedures, or payments between companies.

• You must go to the bank to both issue and cash the bank draft.

• The paper may include watermarks, special inks, or printed details that prevent forgery and verify authenticity.

This type of instrument is useful for both individuals and businesses. Not only because it allows for cashless payments, but also because it offers more security between banks.

Types of Bank Drafts

There are different types of bank drafts depending on their use or the conditions under which they are issued:

Domestic Bank Draft

It is used to send money within the same country, that is, between local banks. Generally, they are common in internal commercial operations, service payments, or contractual commitments that require bank backing.​

This modality offers a secure alternative when it is necessary to deliver a physical document instead of using electronic means.​

International Bank Draft

What is an international wire transfer?

It is an option that allows money to be sent between accounts located in different countries securely. This type of draft is widely used in foreign trade but involves greater requirements and precise documentation.​

Additionally, the process is usually slower and more expensive than international transfers. Therefore, it is important to compare fees before choosing it over other methods.​

Crossed Draft

The crossed draft includes two parallel lines on the document. This means that it cannot be cashed in cash at the counter but must be deposited into a bank account in the recipient's name.​

This modality seeks greater control and traceability of the money, preventing third parties from having the possibility of cashing the draft.​

Commercial Draft

These are drafts issued by companies to settle payments related to their commercial activities.​

It is a formal and secure method to fulfill financial obligations, such as debts to suppliers, service providers, or other similar partners. Especially in sectors where large amounts are handled or it is necessary to leave documentary evidence of the payment.

Difference Between Bank Draft and Transfer

The main difference is that if you want to make a bank transfer, you only need to use a mobile application or go to your bank's online portal. While bank drafts are procedures that require your presence at the branch.​

Instead of moving the money directly between accounts, a physical document is issued, which represents the payment. That is, the process involves more steps and controls.​

In general terms, the differences between making a bank draft or transfer focus on these 4 points:

How to make a bank draft

If you decide to make a bank draft, here are the general steps to follow:

1. Go to your bank. Visit the bank branch and request a payment order for the recipient.

2. Gather the beneficiary’s details. You must have the full name, official ID, and banking information of the recipient.

3. Specify the amount and currency. Indicate the amount you wish to send. If it’s an international draft, specify the destination currency.

4. Authorize the payment. The bank will verify that you have sufficient funds and will issue the cashier’s check.

5. Deliver or send the draft to the recipient. You can hand it over in person, arrange for your bank to send it, or send it yourself.

This is usually the process.

The final step would be for the person receiving the draft to go to their bank to cash or deposit it accordingly.

Bank draft example:

DolarApp: Send and receive payments easily, quickly, and securely

Nowadays, sending money abroad no longer depends on traditional methods like bank drafts. In fact, there are multiple options for both domestic and international transactions.

For international operations, however, DolarApp is one of the most practical alternatives.

Our app allows you to both send and receive international payments in digital dollars. Moreover, you don’t need to have foreign bank accounts — just download the app and activate a USDc account.

You also won’t need to go through an intermediary to convert your money to pesos; you can do it directly from the app with a competitive exchange rate.

While there are other options like Western Union or Xoom (by PayPal), DolarApp is more convenient. Why? Because it’s designed for Latin American countries such as Mexico, Argentina, and Colombia.

Not to mention that the app is an ideal solution if you need to move money in both directions.