Difference between a Check and a Draft

By: | Updated: May-28, 2019

Checks and drafts are a few of the instruments provided by banks to their customers in order to pay for products and services. Though both checks and drafts draw from existing customer bank accounts, they also differ in several ways. There are different parties and processes involved when using checks versus drafts. Continue reading this article to understand their differences.

Summary Table

Check Draft
Parties involved are the drawer, drawee, and payeeParties involved are the drawer and payee
Drawn by an account holder of a bankDrawn by one branch of a bank to another branch of the same bank
Signed by the account holder before releaseDoes not usually have a signature as it is signed by an automated machine
Needs authorization from the bank and the account holderReliably takes out money from the account
Prone to fraudulent activities and counterfeiting actsHighly protected by the bank and risks are avoided in taking out money
Need to be cleared and approved firstAssured and confirmed money
Funds can sometimes be insufficient and can bounceBased on real credit and money in the account; once a draft is produced, the money is already used

Definitions

check
A check

A check is a bank instrument or document that instructs a bank to pay a certain amount of money to the person or party whose name appears on the check. The money is taken from the current or checking account of the person writing the check. This person is called the drawer. The drawer indicates the amount, date, payee, and signs the check. Now the bank, also known as the drawee, will pay the amount stated in the check to the payee.

draft
A draft

A draft is a bank instrument or document created by the bank, also known as the drawer, to be given to a payee. A bank draft is a payment that is guaranteed by a bank on behalf of a payer. Securing a bank draft requires that a payer has already deposited funds equivalent to an indicated amount plus fees to the issuing bank.

Check vs Draft

The main differences between a check and a draft is in the parties involved and the methods or processes needed in the bank transactions. For checks, the parties involved are the drawer, drawee, and payee. While for drafts, only the drawer and payee are involved. Checks are drawn by a current account holder of a bank whereas drafts are drawn by one branch of a bank to another branch of the same bank. The signature of the account holder is needed for checks. But drafts do not usually have signatures as they are already signed by an automated machine.

Authorization from the bank and account holder is needed with checks. Also, clearing and approvals are done prior to releasing the money since checks are sometimes prone to fraudulent activities and counterfeiting acts. With drafts, you have assured and confirmed money since the amount is reliably taken out from the account. This type of bank instrument is highly protected by the bank and risks are avoided when taking out money.

There are times when funds are insufficient that is why some checks bounce. But with drafts, they are based on real credit and money in the account. When a draft is made, money is already used.

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