Q:

What is a certified bank draft?

A:

A certified bank draft is a form of payment with guaranteed funds availability that a bank issues. Before issuing the certified bank draft, the teller looks at the requester's account to determine whether enough money is in place to allow the draft to clear.

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One common reason for taking out a certified bank draft is to show the staff at an automobile dealership that the purchaser has enough funds to make the agreed payment on a car, and the payment is not going to bounce for insufficient funds.

Bank drafts are also popular for exchanges into a foreign currency. The draft itself generally comes with a guarantee against destruction, loss or theft, and it is eligible for 100 percent replacement or reimbursement within a specified time period. People who make purchases in foreign countries and do not want to use traveler's checks or credit cards often use bank drafts to complete transactions.

People who take out bank drafts but do not end up using them should take them back to the bank so that the amount of the draft is deposited back into their account. While bank drafts are guaranteed, they either should be used or put back into the bank as soon as the account holder has made the purchase decision.

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