How do Bank Drafts work

BrianD3

This may sound like a silly question but how exactly does a bank draft work. I need to take around 20 grand out of my account to pay someone. Payment must be in the form of either a personal cheque or a draft. I don't have a chequebook so I'm stuck with drafts.

First question: with a draft, does the money come out of your account straightaway?

Lets say I get the draft and lose it, what happens? Is it the same as losing cash (i.e. no comeback) as someone told me.

Also what happens if i get the draft but change my mind before handing it over to the person I'm paying. Can I bring it back to the bank and get a refund?

I just want to be clear about this as 20 grand isn't a small amount of money for me

jesus_thats_gre

I would imagine it is a cross between a postal order and a cheque :-/ If you get me...

dahamsta

Only the first answer is relatively authoritative...

BrianD3 wrote:

First question: with a draft, does the money come out of your account straightaway?

Yes. Drafts are like cash, you have to pay for it there and then.

Lets say I get the draft and lose it, what happens? Is it the same as losing cash (i.e. no comeback) as someone told me.

I'm pretty sure it is, but you should ask the bank about it.

Also what happens if i get the draft but change my mind before handing it over to the person I'm paying. Can I bring it back to the bank and get a refund?

Ditto above.

adam

Chipboard

BrianD3 wrote:

This may sound like a silly question but how exactly does a bank draft work. I need to take around 20 grand out of my account to pay someone. Payment must be in the form of either a personal cheque or a draft. I don't have a chequebook so I'm stuck with drafts.

A draft is a cheque which is drawn on the account of a bank, rather than on the individuals account - thats why its is considered safer from a credit risk point of view.

BrianD3 wrote:

First question: with a draft, does the money come out of your account straightaway?

Yes.

BrianD3 wrote:

Lets say I get the draft and lose it, what happens? Is it the same as losing cash (i.e. no comeback) as someone told me.

No, its safer than losing cash, because only the payee should be able to cash/lodge the draft. However, someone else could in theory manage to negotiate the draft and if the bank are refunding you for a lost draft they will likely ask you to sign a form indemnifying them against such an occurrence ie you would have to take the loss not them.

BrianD3 wrote:

Also what happens if i get the draft but change my mind before handing it over to the person I'm paying. Can I bring it back to the bank and get a refund?

Yes.

qwertz

Keep in mind that a lot of banks have a long waiting period if you report a draft as lost, some over six month.

vector

BrianD3 wrote:

...I need to take around 20 grand out of my account to pay someone....

being in possession of a piece of paper worth 20k is too risky, you should consider getting 10 x 2,000 drafts, or whatever combination you prefer

you will have to pay commission on each though

so might I suggest you lodge the 20k to the credit union and then get a 10 x 2,000 cheques from them (they dont charge commission on cheques)

I have done this myself (to pay a garage for a new car)

dahamsta

He'll still be carrying €20k.

chump

Why can't you transfer the money directly to their account?

Random

Wasn't there some thing on the news a year or two back? A couple sold their house and posted a e250K cheque over to Ireland which got lost in the post. The bank refused to reimburse them because it's exactly like cash.

Bank drafts are rather annoying though. Try direct funds transfer like chump suggests

CCOVICH

Least risky strategy might be to meet the seller at/outside/near the bank and hand over the draft straight away?

Be aware that the bank are going to be very interested in where the €20k is coming from (ML regulations and all), and you will have to produce ID etc. It may be the case that only the bank/branch where you have your current account will let you buy a draft.

RainyDay

ciaranfo wrote:

Wasn't there some thing on the news a year or two back? A couple sold their house and posted a e250K cheque over to Ireland which got lost in the post. The bank refused to reimburse them because it's exactly like cash.

They sent the draft by courier, but they didn't insure it. The standard insurance limit of the courier company (one of the big reputable ones) is quite low. If ever sending a draft by post/courier, make sure you insure it for the value of the draft.

vector

as I've said, never send huge drafts. Instead send but multiple drafts of smaller equal amounts in seperate envelopes.

RainyDay

vector wrote:

as I've said, never send huge drafts. Instead send but multiple drafts of smaller equal amounts in seperate envelopes.

This makes no sense - You're just increasing the risk of loss (albeit a smaller loss). If you need to send a draft by post, just make sure you insure it for the value of the draft.

vector

RainyDay wrote:

This makes no sense - You're just increasing the risk of loss (albeit a smaller loss). If you need to send a draft by post, just make sure you insure it for the value of the draft.

Each to his own

increasing the risk of loss yes
but as you say its a smaller loss

its just another way of looking at life

something bad may happen but you can at least reduce its severity

Board@Work

Word of warning about accepting drafts. They can be very easily forged or altered. Only accept them during business hours and get the number of the bank branch it was issued. Call them and give the draft number and verify with them the amount and it is legit before accepting it..

grumpytrousers

vector wrote:

as I've said, never send huge drafts. Instead send but multiple drafts of smaller equal amounts in seperate envelopes.

Surely if you send a draft for €20K by registered post you're covered.

Stroll up to PO Counter. They'll ask how much the contents is worth. You say what's contained within. You may have a pay insurance premium (but not too high, 'cos as has been said, the draft is payable to one person only) and you're sorted.

If the letter doesn't arrive, it's the problem of the PO!

Our man in Havana

They won't cover over €1000

RainyDay

grumpytrousers wrote:

Surely if you send a draft for €20K by registered post you're covered.

Stroll up to PO Counter. They'll ask how much the contents is worth. You say what's contained within. You may have a pay insurance premium (but not too high, 'cos as has been said, the draft is payable to one person only) and you're sorted.

If the letter doesn't arrive, it's the problem of the PO!

As Bond points out, there is a limit to the insurance cover available on registered post - the limit is €1,750.

The fact that it's payable to one person only is pretty irrelevant. If it's lost, it's lost. So you can spend months chasing the bank, signing indemnities to get a replacement, or you can get it insured for the value of the draft.

But to get back to OP's question about what happens if he chooses not to hand over the draft, I wouldn't consider getting the draft until I'm 100% sure that I want to make the purchase. If you're going to see a car or whatever, give yourself time to think - take two trips if that's what it takes. But don't rush into a €20k purchase.

shelsfan

Do you just put their name on it?

shelsfan

Do you just give their name and then send it by post?

shelsfan

I want to send a bank draft to England. Do I just give their name and then send it by post? Can I get one made out in sterling?

nlgbbbblth

shelsfan wrote:

I want to send a bank draft to England. Do I just give their name and then send it by post? Can I get one made out in sterling?

Yes and yes. Commission fee is around €3.81

TempestSabre

Board@Work wrote:

Word of warning about accepting drafts. They can be very easily forged or altered. Only accept them during business hours and get the number of the bank branch it was issued. Call them and give the draft number and verify with them the amount and it is legit before accepting it..

Thats news to me. I suppose they are as easily forged as checks are. Seems like every route is risky these day. What to people think about bank transfers?

Shigsy

Sorry to drag up an old thread but it's so relevent that it seems a waste to start a new thread
Anyway, i'm planning on paying for a car in England by Bank Draft. I'm heading over this Saturday to pay for the car and drive it back. Naturally enough I dont want to hand the money over until im happy with the car (havent seen it in person yet) and he obviously doesn't want to had his car over until he's got the money. So I thought a bank draft would be the best option, with the added bonus of some banks in England being open on a Saturday. I said this to him and he said a bank draft takes a day or 2 to be processed and the cash show up in your account, which doesn't suit me cause i need to pretty much pay for the car and leave to make the boat back. Is it not good enough (from his point of view) to simply bring the draft into the bank with me there and have them verify that it's a real valid draft? I mean a draft is basically cash, it doesnt get drawn from my account, i have to actually pay for it upfront in my own bank, so it's "worth" whatever value is on it as long as it's not a fake. Am i making sense?

Our man in Havana

He is right. In this day and age bank drafts are no better than a cheque and are treated as such by the banks. It will take a few days for the draft to clear (same as a normal cheque) hence his unwillingness to accept it.

The only other option is cash.

Shigsy

I understand that it could take a day or even 2 days for the money to actually be transfered to his account, but the point im making is that once the bank verify and accept the bank draft when we walk into the bank (i.e. it's valid and is not a fake) then it is irrelevant how long it takes to actually show up in his account, i no longer need to be there as it has been accepted. After all, a bank draft is NOT a cheque, in that the money is not being drawn from my bank account. It is being drawn from the Banks account, which is obviouly going to have the money
In the unlikely event of me bringing cash, how much notice would I need to give the bank for about £12,000 (notice the sterling symbol)? I'm heading over Saturday morning so would need to order it tomorrow (thursday) and collect it on friday. Is one days notice enough? Do you need to give any notice to the bank if your planning on walking to and getting a bank draft for that kinda money?

Shigsy

EDIT: Double post... damn i hate that

Our man in Havana

After all, a bank draft is NOT a cheque

Afraid it is only a cheque. A cheque drawn on a banks own account. How does the bank in the UK know the draft is real and not stolen/forged? They will just accept it as a normal cheque and apply the normal clearing cycle. The fact it is a draft does not give it any special treatment.

Banks normally require 10 days notice for large orders of foreign currency. I doubt a normal branch would have £12,000 on hand. A draft can be issued immediately.

Shigsy

Ok, thanks for the info. Well if this guy doesn't want to run with the Bank Draft idea then i'm out of options! It's far too late to be ordering foreign currency at this stage considering my flight and ferry are booked Is there any way to do a bank transfer on a Saturday, even though no bank branch opens here? Like some kinda of bank transfer over the phone? Or maybe online? Just trying to come up with a backup plan if he doesn't go for the draft idea

Thanks

Our man in Havana

You can do an urgent bank transfer to his UK account. It will cost a few bob but the money will be in the UK account the same day subject to the transfer happening before the cut off time which is normally noon. If you are an AIB customer you can do it all online.

Shigsy

Bond-007 wrote: »

You can do an urgent bank transfer to his UK account. It will cost a few bob but the money will be in the UK account the same day subject to the transfer happening before the cut off time which is normally noon. If you are an AIB customer you can do it all online.

Unfortunately this isn't really an option because it's working off the assumption that I am definitely buying the car. I would not want to transfer any money into his account until i was happy with the car, so even if I could start the transfer then, i would have to hang around for the rest of the day until the funds hit his account. With a boat to catch, this isn't doable. Anyway, I rang my bank earlier and asked about doing a transfer online and she said it couldn't be done for that amount of money so it isn't an option either way. I'm just going to bring a bank draft and he better accept it

antoinolachtnai

Irish bank draft? In the UK? He may not be completely happy with that.

As I understand it, this type of business is generally done in cash. This is how I would do it.

You should check that you can easily get a refund on a draft.

At the end of the day, business is all about trust. If the guy doesn't trust you, you're gonna have to trust him, and you you're going to have to make a return trip next week.

a.

amen

if he takes credit cards then preload your card with the cash and ring your bank let them you will be making a large purchase.

he will have the money then and there
or maybe laser?