Skip to main content
91809cbb75764741d6c4b4e917ab057cf1fc3ebe
• Dec 13, 2018

Basically, treat bank drafts like cash. These are useful when you need to make a payment with guaranteed funds and commonly used, for example, when paying a legal settlement or making a large purchase for a home or vehicle. Unlike a personal cheque, a bank draft is guaranteed by the financial institution, so the person to whom the bank draft is payable is sure to receive the amount on the draft.

A bank draft can't be cancelled once it has been delivered to the person it's for. If you lose the draft before you have been able to deliver it, you can replace the lost draft if you are the purchaser but you may have to sign an indemnity or provide a surety bond from a licensed insurance company before the draft is replaced.

How bank drafts work:

  1. When you ask to purchase a bank draft, the funds are immediately withdrawn from your deposit account.
  2. These funds are put into the bank's reserve account until the bank draft is presented for payment.
  3. As the purchaser of the bank draft, you are responsible for delivering the bank draft to the payee.
  4. Once the bank draft has been deposited by that individual or entity, their financial institution may still put a hold on the funds until the bank draft clears the payments system.
Want to learn more about TD Explains?
Cheque fraud – How it works and how to recognize it
TD Explains: What is a mortgage broker?
TD Explains: How to help protect yourself from phone scams

See you in a bit

You are now leaving our website and entering a third-party website over which we have no control.

Continue to site Return to TD Stories

Neither TD Bank US Holding Company, nor its subsidiaries or affiliates, is responsible for the content of the third-party sites hyperlinked from this page, nor do they guarantee or endorse the information, recommendations, products or services offered on third party sites.

Third-party sites may have different Privacy and Security policies than TD Bank US Holding Company. You should review the Privacy and Security policies of any third-party website before you provide personal or confidential information.