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The concise guide to international bank drafts
Send money overseas safely and inexpensively with a bank draft.
Key takeaways
- Similar to a cashier's check, bank drafts are typically used for large payments overseas.
- Although it isn't the quickest way to send money, bank drafts are accepted in most countries and still used frequently.
- Bank drafts are cashed just like any other check, but must be deposited into your bank account.
What is a bank draft?
A bank draft is a payment issued by a bank on behalf of the payer, which allows another bank to draw funds directly from the bank issuing the draft. International bank drafts are often used for remittances because the bank draft is immediately converted into a foreign currency when it's created, unlike a regular check.
Bank drafts are often confused with cashier's checks and money orders, but have key differences that give bank drafts the advantage when used for international transfers:
- Exchange rate. Bank drafts are exchanged immediately when they're created. Going to your bank and creating a bank draft for €100 will use that day's exchange rate, while a money order or cashier's check will use the exchange rate when it's cashed - which could lead to less money being sent if the exchange rate shifts heavily.
- No limits. Bank drafts have no limits. Money orders are usually limited to $1,000, depending on the business you're purchasing them from.
- Typically safer. Many money scams involve fake money orders and cashier's checks, the former is difficult to verify. Bank drafts can be verified by contacting the issuing bank and providing the details on the bank draft itself.
How does a bank draft work?
A bank draft is effectively a check from a financial institution. This means the funds for the transaction are withdrawn from the institution rather than from the check drawer's account.
This offers an important benefit over an ordinary check from an individual. The funds from a normal check are not withdrawn from the drawer's account until the check is cleared, which means there may not be sufficient funds available when the check is cashed and it may therefore bounce.
With a bank draft, however, when a person requests one they must immediately transfer the funds from their account to cover the amount of the check. This adds a crucial extra level of security over a normal check.
Drafts can be drawn in the foreign currency you choose and are available for personal or business use.
Let's crunch the numbers: Sending $1,000 to Europe.
Let's say you need to send $1,000 to family in the Europe. Here's what you might face as far as costs when using a bank draft compared to an international money transfer as of 03 January 2023.
| Money transfer | Bank draft | |
|---|---|---|
| Fee | $5 | $15 + receiving bank fees |
| Exchange rate | 1 AUD = 0.63 EUR | 1 AUD = 0.61 EUR |
| Transfer speed | 1-2 days | 1-3 weeks, depending on mail |
| Amount received | EUR 626.85 | EUR 600.85 |
| Verdict |
|
|
The bank draft ends up being the slowest and gets the smallest amount of money to your recipient in the Eurozone.
How do I cash a bank draft?
Bank drafts are cashed just like any other check, but must be deposited into your bank account. Cash your bank draft in a variety of ways, including:
- At the bank. Bring your bank draft to your bank, along with photo identification, and ask the teller to deposit it into your account.
- At an ATM. Many banks allow you to deposit bank drafts at ATMs, as long as you hold an account with the bank. However, funds may not be immediately available when depositing your bank draft at an ATM.
- Check cashing store. Some check-cashing stores may be able to turn your bank draft into cash, but if it's an international bank draft, chances are slimmer. Use this option as a last resort because it has the lowest chance of success.
How to compare bank drafts
- Fees. This is the most important factor to look at when comparing bank drafts. Look at the different fees charged for obtaining a draft and see if you could save money with a different provider.
- Available currencies and countries. Speak to your bank or financial institution about the currencies in which you can obtain a bank draft and the countries to which you can send them. If your bank doesn't support bank drafts in your desired foreign currency, compare international money transfer options to send a transfer online.
- Processing time. Once you apply for a draft, how long will it take for your financial institution to process it?
- Application options. It's also a good idea to compare the different methods available when applying for a bank draft. You'll typically need to visit a branch or apply in writing.
Pros and cons of a bank draft
Pros
- Accepted in most parts of the world. International bank drafts are accepted in the majority of countries around the globe.
- Inexpensive. Although you'll have to pay a fee when you apply for an international bank draft, drafts are still a relatively cost-effective method of sending funds overseas.
- Created in the local currency. As the check is made out in the local currency where it will be sent, it doesn't require conversion and is therefore able to be banked quicker than a check written in AUD.
- Secure. Bank drafts must be deposited into a bank account and cannot be cashed.
Cons
- Slow. Bank drafts typically take several weeks to process, so they're only a viable option where the speed of the transaction is not a concern.
- Availability. There's a chance your bank may not support the currency and country you want to send a bank draft to.
- Time consuming to replace. Bank drafts are secured and can be replaced when lost, but the process is far from easy. Every bank has its own procedure, and at the very minimum you'll have to wait for the bank draft to be delivered internationally a second time.
Is using a bank draft my best option?
Bank drafts are secure ways to send money. But when sending an international transfer, you have to rely on the postal service to deliver the bank draft safely. Many things can go wrong along the way, and even when everything goes right, there will still be a significant delay between sending and receiving the bank draft.
Consider using an international money transfer service instead of a bank draft when speed and convenience are crucial.
Finder survey: Would people use a bank or a money transfer specialist to send money overseas?
| Response | Female | Male |
|---|---|---|
| I do not send money overseas | 46.92% | 36.18% |
| Bank | 31.28% | 35.62% |
| Money transfer specialist | 15.47% | 22.63% |
| Neither | 6.33% | 5.57% |
Source: Finder survey by Pure Profile of 1110 Australians, December 2023
Using a bank draft to pay someone internationally
The transfer services below are not bank drafts, but rather allow you to make bank transfers which can be received by your recipient in their bank account or as cash. Consider using these services when:
- Speed is important. Some international money transfer companies can have money in your recipient's account in as little as a few minutes.
- You want to pay in cash or with a credit card. Bank drafts are limited to payment by bank account, so use an international money transfer to pay by debit card, credit card or cash.
- Your bank is closed. Bank drafts have to be created at the bank, in person, but online money transfers can be sent 24/7, 365 days a year from the comfort of your home.
- Exchange rates are important. Bank drafts use the exchange rate offered by your bank, which may not be as strong as the mid-market rate offered by many money transfer companies.
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Bottom line
Bank drafts have their time and place, but as the financial world shifts more and more into the digital realm, bank drafts may become obsolete. There are many ways to send money internationally that can be done entirely online - to learn how to get started with international money transfers, head over to our guide on transferring money.
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I am expecting to receive a banker’s draft for USD 500,000 from Nigeria, issued by HSBC. What is the time limit for clearing the banker’s draft in the UAE? What is the validity period of a banker’s draft?
Hi Harry, Timing for depositing and clearing a banker’s draft will vary depending on the bank you choose to deposit it into and the kind of account you deposit it into – there’s no single rule that applies. The validity period will also vary depending on the issuing bank. You don’t specify the source of these funds, but given the high prevalance of scams originating in Nigeria you should be extra-vigilant in any transactions.
I received an International Demand Draft from the Malaysian Government payable to me in Australian Dollars. Since I have a bank account with NAB, I deposited at an NAB branch last Friday (21st April 2017). The funds were shown in the Current Balance but not in the Available Balance, which I totally understand. After about 3 days, the funds were fully deposited and was shown in the Available Balance.
However a couple of days ago, the whole amount was Credited Out of my bank account. I called NAB immediately to ask what the heck happened? No one could give me an answer and said it was “dishonoured”, to which I responded as impossible! As a friend of mine received the same payment from the Malaysian Government in Foreign Demand Draft and paid into her bank, which had no issue.
Anyway NAB said they’ll raise an investigation and probably return the Bank Draft to me. Are they serious?
Hi Kevin,
Thanks for your question.
There are several reasons why a demand draft may be dishonoured. You may want to directly contact the issuing bank in Malaysia, or the person or agency that issued you the demand draft to verify the reason why it was dishonoured.
Cheers,
Anndy
I am located in India .Can I prepare a bank draft bankers cheque payable inAustralian Dollars in the name of an individual who is having a bank account there.Objective is making to some token gift an expression and affection from relatives and friends. with 400Dollars for birthday or marriage anniversary.
Hi Nirmal,
Thank you for your inquiry.
You can actually send a bank cheque payable in Australian dollars so long that your bank in India allows that transaction. You’d be best to get in touch with your bank in India to confirm how you can send a cheque to Australia.
Cheers,
May
I recd a foreign bank draft after 4 months of the date of issue. Can it still be presented in Indian bank in india. It’s in Indian currency.
Hi Neena,
Thanks for your question.
Bank drafts are guaranteed and have secured funds so they don’t generally expire, unlike checks. But depending on the issuing bank, some drafts may have expiration date of like 6 months.
If you have a bank account in India, you can deposit it to your account. It cannot be cashed.
Cheers,
Anndy
Hi – I’m wondering if international bank drafts can expire. For example, I found an old bank draft (15 months old) in a birthday card, is it still be valid?
It was drawn on a Westpac account overseas and it is in AUD.
Thanks!
Hi Kate,
Thanks for your question.
A bank draft or bank cheque with Westpac usually expires after six months. Bank cheques are valid for 6 months from the date of purchase.
Cheers,
May