What is the difference between a bank draft and a cashier's check?

A bank draft is drawn on the bank's funds and guaranteed by the issuing bank, while a cashier's check is also guaranteed but is issued directly by the bank itself.

Bank Draft: A Comprehensive Guide to Its Legal Definition and Function

Q: What is the difference between a bank draft and a cashier&#039;s check?

A bank draft is drawn on the bank&#039;s funds and guaranteed by the issuing bank, while a cashier&#039;s check is also guaranteed but is issued directly by the bank itself.

Q: Can I cancel a bank draft once it has been issued?

Generally, bank drafts cannot be canceled once issued, as the funds are already set aside by the bank.

Q: How long is a bank draft valid?

Bank drafts typically remain valid for six months, but this can vary by state and bank policy.

Definition & Meaning

A bank draft is a secure payment method where a bank guarantees the availability of funds. It is essentially a check or order for payment drawn on the bank's funds. When a bank issues a draft, it sets aside the necessary amount from the applicant's account, ensuring that the payment will not bounce. This makes bank drafts a preferred option for large transactions, providing peace of mind to the person accepting the payment.

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Legal Use & context

Bank drafts are commonly used in various legal and financial contexts, particularly in business transactions. They are relevant in areas such as:

Commercial law
Real estate transactions
Contractual agreements

Users can manage bank drafts through legal forms and templates available on platforms like US Legal Forms, which provide resources drafted by experienced attorneys.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A company needs to pay a supplier $10,000 for materials. Instead of using a personal check, they obtain a bank draft from their bank, ensuring the supplier receives guaranteed funds.

Example 2: A homebuyer uses a bank draft to make a down payment on a property, providing the seller with assurance that the payment will not bounce (hypothetical example).

State-by-state differences

Examples of state differences (not exhaustive):

State	Bank Draft Regulations
California	Bank drafts are commonly accepted for large transactions, with specific regulations on expiration dates.
New York	Requires bank drafts to be presented within 90 days for payment.
Texas	Allows bank drafts as valid payment methods but may have additional verification requirements.

This is not a complete list. State laws vary, and users should consult local rules for specific guidance.

Comparison with related terms

Term	Description
Bank Draft	A payment guaranteed by the issuing bank, ensuring funds are available.
Cashier's Check	A check guaranteed by a bank, drawn on the bank's own funds.
Personal Check	A check written against an individual's account, not guaranteed by the bank.

Common misunderstandings

What to do if this term applies to you

If you need to use a bank draft, follow these steps:

Contact your bank to request a bank draft.
Ensure you have sufficient funds in your account.
Provide any necessary information to the bank for processing.

For additional assistance, consider exploring US Legal Forms for templates related to bank drafts. If your situation is complex, seeking professional legal advice may be beneficial.

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Quick facts

Typical fees: Varies by bank, often around $10 to $30.
Jurisdiction: Governed by state banking laws.
Possible penalties: Fees for insufficient funds if the draft is not honored.

Key takeaways

Frequently asked questions

What is the difference between a bank draft and a cashier's check?

A bank draft is drawn on the bank's funds and guaranteed by the issuing bank, while a cashier's check is also guaranteed but is issued directly by the bank itself.