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Difference between Bank Draft and Money Order
Customers and merchants alike in the current world have a plethora of options when it comes to how they might make a purchase. This is due to the fact that a broad array of payment options exists such as cash, cheques, mobile payments, credit cards, bitcoin (yes, this has been expanding for years), money orders, bartering, and bank drafts.
Money may be exchanged for a wide variety of things, including cash, checks, mobile payments, credit cards, and bitcoin. In this article, we will discuss about bank drafts and money orders. Although they are less common now than they were in the past, you may still encounter them when completing a purchase or a payment. There is still a chance that they may be confused for one another, despite their differences.
What is Bank Draft?
This payment has been made on the payor's behalf and is backed by the bank that issued the cheque. In order to provide a bank draft, banking institutions must first verify that the account of the drawee has sufficient funds. As soon as the bank draft is cleared, the funds are transferred from the drawer's account to the payees. A bank draft is a trusted and secure payment option that may be given to the payee.
A bank draft requires a deposit equal to the amount of the check, plus any applicable fees, before it may be obtained. Although the bank actually processes the payment, the check is issued in the name of the individual writing it.
The bank draft itself is a guarantee that the required funds will be accessible when the draft is drawn and issued. An issued bank draft cannot be revoked since it evidences an already completed transaction. However, if the buyer provides the appropriate paperwork, a stolen, lost, or destroyed draft can be replaced or canceled.
What is Money Order?
This certificate guarantees the payee will be paid on demand and can be issued by either a bank or the government. As they are widely acknowledged and may be exchanged for cash, they are frequently used by those who lack access to conventional banking services. Anyone with cash on hand may easily receive a money order, as they can be obtained at any number of retail outlets, including drugstores, supermarkets, and post offices. They may be phony, and they're cheap. As a result, people should be very careful about getting them from strangers.
The buyer must specify the recipient's name and the desired payment amount. However, the maximum amount that may be covered by a single money order is $1,000, so larger amounts would require multiple money orders. A receipt with the serial order particulars is delivered when the transaction has been finalized. The buyer should maintain the receipt until they are certain that the money has been processed, as it may be difficult to trace the down payment without it.
Here, we will discuss the benefits of using money orders.
They're safe since they don't include sensitive information like a social security number or bank account number.
There are no additional costs associated with depositing them into a bank account.
They are cashable in countries other than the one where they were issued.
They may be redeemed at any of the area's banks or credit unions.
There are a few disadvantages to utilizing money orders, such as
Sometimes it's hard to tell if a money order was eventually cashed.
There may be a fee associated with cashing a check.
There may be a delay if a money order is redeemed at a different bank than the one that issued it.
The risk of deception is present with them
Differences: Bank Draft and Money Order
Both bank drafts and money orders are a type of written and expressed agreement to pay a certain amount at a certain time. Since the payer doesn't need to move around a lot of cash, both are considered safe ways of payment. However, there are quite a few differences between these two terms, which we have highlighted in the following table:
|Characteristics||Bank Draft||Money Order|
|Definition||Bank drafts are payments that are made on behalf of the payer and guaranteed by the bank that issued the draft.||A "money order" is a document that promises the recipient payment on the date specified.|
|Nature||A bank draft is a check that is sent to the payee after the issuer has taken the monies from their account.||If you want to buy a money order, you'll need cash.|
|Security||Bank drafts are not a safe method of payment since they require sensitive information like a bank account number.||A money order is an extra layer of security because it does not contain any identifying information.|
|Issuer||A bank draft can only be made by a bank on behalf of the customer.||A money order can be purchased at any legitimate business, including banks, post offices, and major retailers.|
|Ease of purchase||Bank drafts is trickier to get than other payment methods since the issuer must physically visit their own bank.||Money orders are helpful and easy to use since they may be obtained from any legitimate bank.|
Bank drafts are payments that are made on behalf of the payer and guaranteed by the bank that issued the draft. They can only be issued by banks and are delivered to the payee when funds have been transferred from the account of the issuer.
Instead of writing a check, you can send money with a money order, which is a certificate guaranteeing payment at a certain time. It is far less of a hassle to get because it may be issued by a variety of trusted institutions including post offices, verified companies, and banks.
Despite their differences, both forms of payment are predetermined and preprinted in advance. Since the payer is not required to physically transport large sums of cash, these payment methods are viewed as secure ways of payment.
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