A banker's draft or banker’s cheque is drawn directly on the issuing bank (or building society if it is a building society cheque) rather than on the account of a customer, and signed by a bank or building society official.
A banker's draft is not strictly speaking a cheque but, like a cheque, it is subject to the Bills of Exchange Act 1882 and is cleared in the same way as a cheque.
If you have requested a banker's cheque or draft, the bank will take the money for this draft from your account to pay for it before giving you the draft. Therefore, the recipient of the banker’s cheque or draft can be certain that it will not be returned unpaid (bounce) due to lack of funds in your account.
If you’ve requested, received and handed over a banker’s cheque or draft you cannot stop it if you change your mind about the payment, but the bank will do so if the draft has been reported lost or stolen.
This means that, provided the banker’s cheque or draft is genuine, the recipient can be certain that funds will clear. The 2-4-6 timescales for clearing for value, withdrawal and fate apply.
You can ask for a draft at the branch counter or over the phone, but a period of notice may be required. The bank may prefer to issue a banker’s cheque, which works in the same way. You should check your options with your bank. Bankers’ drafts have traditionally been used for large, one-off payments, such as the purchase of a car, where consumers or businesses want to be sure that the purchaser has sufficient funds in their account.
It takes the same time as it takes to clear a cheque. The 2-4-6 timescales for cheque clearing set a maximum time limit of two, four and six working days for each of the stages after paying in a cheque to a current or basic bank account.
This means that you will start to earn interest by the second working day after paying in a cheque or draft to your account, you can withdraw the money paid in by the fourth working day and, by the end of the sixth working day after paying in the cheque or draft, you can be certain that the money is yours. After this time, the money cannot be claimed back by your bank without your consent, unless you are a knowing party to fraud.
For savings accounts, the timescales are 2-6-6, which means that you can withdraw the money at the start of the sixth working day after paying in the draft.
Yes, if you decide to accept a cheque or banker’s draft in payment, you can be sure the money is yours at the end of six working days after paying it in. After this time, the money cannot be claimed back by your bank without your consent, unless you are a knowing party to fraud.
If you’ve received a banker’s draft or banker’s cheque you can be certain by the end of the sixth working day after paying in the cheque or draft that the money is yours to keep; it cannot be claimed back from your account after that time, without your consent, even if it turns out the cheque or draft is fraudulent, unless you are a knowing party to fraud. If certainty is important to you, you should not hand over any goods or provide any services until you know for sure that the funds are yours to keep.
Alternatively, if you are in any doubt that the draft is genuine because you do not absolutely know and trust the person from whom you are accepting payment, it is better to ask for a Faster Payment or a CHAPS payment. These are both are same-day, and irrevocable ways to pay. The Faster Payment Service is free to consumers – online, mobile and telephone banking payments are all made this way. There is a charge associated with sending a CHAPS payment. So if you are selling a car, for example, or accepting another large payment, you may wish to consider sharing the cost of a CHAPS payment with the buyer, so that you can both be certain that the transaction will be cleared.
If you are a victim of a scam because you have received a banker’s cheque or draft that turns out to be fraudulent, and you have parted with either goods or services or, in the case of receiving a cheque/draft for an inflated amount, you have paid cash back to the buyer, you are unlikely to be refunded because the transaction was authorised by you. This is why you should only accept a banker’s draft if you absolutely know and trust the person giving it to you.
You are best advised not to part with goods and services until you have certainty at the end of the sixth working day after paying in the banker’s draft, that the funds are yours to keep.
No – bankers’ drafts drawn on UK banks are not meant to be used for overseas payments; it is the same with cheques drawn on UK banks.
You can ask for a foreign currency draft, which is a banker’s draft or cheque made out to the recipient and payable at one of your bank’s agent banks overseas. These drafts are subject to the laws and practices of the countries where they are drawn rather than those in the UK.
It is, however, quicker, easier and safer to make an automated international payment if you wish to send money overseas.
If you want to know more information about automated international payments and foreign currency drafts you should speak to your bank. There is also useful information relating to this on the Pay Your Way website at www.payyourway.org.uk.
They are not safe from fraud – bankers’ drafts and building society cheques can be stolen or fraudulently used. The comfort they provide is that they will not be returned unpaid (i.e. bounce) due to lack of funds. This is because they are drawn on the account of the actual bank itself and are paid for in advance by the person or business that has requested it.
Bankers’ drafts and building society cheques (by which we mean a building society cheque that is issued and signed by an officer of the building society itself rather than a personal customer) are treated in the same way as ordinary cheques and have to go through the clearing system. Therefore, you should still wait until the end of the sixth working day to be certain the money is yours.