What is a bankers draft and why would you pay for one?

I had a Natwest Bankers draft today (a win from my case against them) so for fun went into natwest to pay it into my account and asked how long it would take to clear as it was the same bank and a bankers draft... the answer? 5 working days.

So exactly why would you pay £21 or so for a bankers draft?

A personal cheque is a cheque drawn on a personal account. A bank draft is a cheque

drawn on the bank's account. To get one, you have to give them cleared funds first. Ie if you want a cheque from them for £1000, you must give them £1000-plus

their charge- I must say that £21 is a bit excessive- sure it's not £12?

So the cheque is virtually guaranteed not to bounce, unlike a personal cheque where you take pot luck. The banks say they are as good as cash. They are not.

They can be stopped just like a personal cheque-though you usually need a good reason. You have lost the draft, or you have a serious dispute with the person you gave the cheque to, for example. Drafts can also be forged and I know of instances where blank drafts have been stolen from a branch and then filled in for large amounts by the thief.

Why use them? Safety for one thing. Drafts are usually for fairly large amounts

[buying a car as an example]. If you get mugged with cash on you, you lose your cash:with a draft all you do is stop the cheque and get a replacement. Also much

easier to send it through the post than cash where the recipient will not accept a

personal cheque. It's a shame that just about the only bank that has a cheque

guarantee card for £1000 is the United bank of Kuwait.

Also if you accept a draft from someone, once you have exchanged your goods for it, do not let that person have access to the draft. There have been instances

where once they have your goods, they snatch the draft and tear it up then

claim they lost it and get their money back from the bank.

PS the reason that it takes 5 days to clear is that as it is still a cheque, it has to go through the same process as a

personal cheque [the bank clearing system]for it to be paid.

ok, i apologise for posting again, but here goes.

at the halifax where i work, and deal with drafts all the time.

we can stop them, but only on reciept of written authourity from the payee on the draft, that is the only way we can do it, and get the customer to sign to accept that is the only way it will be stopped.

we can pay a halifax draft into a halifax account as cleared funds, slighty different procedures if it is the drawing branch, or another one, but end result is the funds available straight away.

hope that helps in any way.

You are welcome to post whenever you want Howard.

I am surprised in a way that the Halifax treats drafts drawn on themselves as cleared funds straight away. After all the draft itself will not be cleared for payment

until 3 days later when it arrives at Head Office. There it will be checked for

authenticity and that it has not been stopped, nor any other reason for non-payment.

Compared to Nat West, the Halifax is comparatively new to having received banking status and so may not have been heavily stung by adopting this practice commendable though it may be. It remains to be seen if they will be forced to change in the future, but they do run a risk as it stands.

Someone I know was scammed via a fake bankers draft. (classic nigerian [problem], they sent a bankers draft for larger than the sale amount, then asked my friend to send them the balance minus an amount for her trouble - my friend assumed that as the bankers draft had cleared into her account it was fine and the money was safe) The bank accepted it when it was paid in, cleared it and my friend sent the money. A few days later my friend happened to mention it to me, I realised what was going on and told her to phone the bank immediately. They said 'yes there are scams like this, we'll look into it'. 2 weeks later my friend received a letter informing them that it was fake. It wasn't even a very good fake (my friend realised when she saw it again how bad it was, but she assumed as the bank accepted it that they must have checked it and it was fine)

Result - the bank took the money back with no liability to themselves whatsover. The police did sod all.

I certainly wouldn't accept a bankers draft for large amounts such as a car. The rules about clearing must have changed, as then (last year) the bank had an obligation to make the funds available within 48hrs, what they don't tell you and what very few people seem to be aware of is that it can bounce and they will take the money back 2 weeks later.

I know my friend went to the FSA and CA, but never got a penny back. I think the amount was around £900.

You are welcome to post whenever you want Howard.

I am surprised in a way that the Halifax treats drafts drawn on themselves as cleared funds straight away. After all the draft itself will not be cleared for payment

until 3 days later when it arrives at Head Office. There it will be checked for

authenticity and that it has not been stopped, nor any other reason for non-payment.

Compared to Nat West, the Halifax is comparatively new to having received banking status and so may not have been heavily stung by adopting this practice commendable though it may be. It remains to be seen if they will be forced to change in the future, but they do run a risk as it stands.

we do quite a few checks when it is presented, even when it is at the dsame branch it is drawn, anything doesn't add up, it goes straight into the normal clearing system, and an investigation is started at the same time.

This topic was closed on 10 March 2019.

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