Bank Draft Law and Legal Definition

A bank draft is a check, draft or other order for payment of money drawn on a bank’s fund. The payment of a bank draft is guaranteed to be available by the issuing bank. Some bank drafts are drawn on banks other than an issuing bank, in which the issuing bank's funds are deposited. Bank checks are issued only after reviewing an applicant’s account. When there is sufficient fund in applicant’s account, the bank will set aside funds from the applicant’s account to be given out when the bank draft is used.

Bank drafts are more secure for large business transactions because the funds are guaranteed by the bank that issued the draft. A bank draft adds extra security to the person accepting the bank draft. The guarantee is that the check will not bounce.