Dec 15, 2017
What customers need to know about bank drafts
Bank drafts are more secure than cash and may be more convenient than other money products, depending on the customer's needs. Because they are drawn on the bank's, not the customer's, account, with the proper ID, they can be negotiated at any financial institution with fewer constraints. For this reason, it's important to protect them like cash.
When a bank draft is lost there are procedures to replace it. Depending on the circumstances, a purchaser may be asked to sign an indemnity – basically, a commitment to pay back the amount if the original draft is presented for payment as well. They may also be asked to provide security, to ensure payment under the indemnity. This is because the bank cannot cancel a draft – it must honour its commitment to pay it, even if a replacement draft has been issued and cashed.