What is a draft check?

Updated: 10/24/2022
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13y ago

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Any business can create a bank draft. A bank draft, is also called a demand draft, or check draft. It is a legal copy of the check that is created by the merchant, and authorized by the account holder, but not created by the account holder.

Examples of bank drafts are anything that does not have the original signuature. An insurance draft is signed by a machine, not the actual treasurer, a money order has a pre-printed signature and is also a draft. A cashier's check is often considered a draft because it is signed by the cashier, and not the bank president - so it is created on behalf of the ture signer on the account. Tax refund checks are drafts, and so are rebate checks when you buy products and get money back.

A regular check is created by the account holder, and signed (authorized) by the account holder. A regular check is then given to the merchant and is considered an original item. Checks have certain requirements as to how they are printed, what ink is used, and require the signature of the authorized signer on the checking account.

A bank draft is created by the merchant, and the signature is not required. The account holder must authorize the merchant to create a bank draft, and this can be done by phone, fax, by contract, implication, or online.

Authorization is indicated on a bank draft in the signature blank, usually by a statement such as the following: "This draft is preauthorized by your depositor, no signature required." It can also have a signature stamp or preprinted signature likeness of the account holder.

Demand Drafts are often called checks by phone, checks by fax or online checks because authorization can be obtained this way. The actual draft is the physical item that is printed by the merchant.

How to create a bank draft if you are a business:

Accept checks by phone, checks by fax or take checks online from customers, just like you would take credit cards. Using an existing shopping cart, secure web form, or third party payment form online will allow, you to gather all of the information you need to accept checks online and create a draft of the check, called a bank draft.

Once you have gathered the information from your customer, software like CheckWriter, will print a physical draft of the check for deposit into any bank the same day.

Demand drafts, or bank drafts are For Deposit Only items and typically cannot be "cashed" like a regular check. Checks can be paid to a third party, cashed at the grocery store or check casher, or presented for payment at the issuing bank for cash.

Unlike a check, a demand bank draft is for deposit. This is one way banks cut down on fraud. You must deposit a check draft into a bank account, creating a paper trail.

Because once they are deposited, banks treat your draft just like a regular check, your funds should credit to your ledger balance the same business day. There are almost never fees associated with check drafts, and a draft will clear just like a regular check. The account holder will get back the physical item you deposit, or image per the terms of their account statement.

Benefits to creating drafts:

Check drafting is a fantastic way to take payment. The benefits go on and on with taking drafts over any other eCheck solutions like ACH.

- Bank drafts are treated just like a check you get through the mail.

- Bank drafts credit to your ledger balance the same banking day.

- Bank drafts have no fees associated with them.

- Bank drafts are created onsite with no third party processor.

- No merchant account is required to create bank drafts.

- Strict ACH regulations published by N.A.C.H.A. do not apply to drafts.

- Any business, including telemarketing, credit repair and others can

use the software to create a valid bank draft.

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A check is a type of bank draft. The Savings and Loan issued a bank draft to cover the amount. They sent a bank draft to the utility company.

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