What Is the Difference Between a Money Order and a Bank Draft?

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With so many financial tools on offer today, it can be challenging to discern one from another. Among these tools, money orders and bank drafts stand out. But what is the difference between a money order and a bank draft? Keep reading to find out.

What Is the Difference Between a Money Order and a Bank Draft?

Both money orders and bank drafts are secure methods of payment, but they cater to different needs and have distinct features. While money orders are prepaid instruments available from various outlets, bank drafts are payment orders backed by the credibility of the issuing bank. Here’s a look at the specifics of each.

Money Order

A money order is a prepaid payment order, meaning the funds are provided upfront, ensuring guaranteed payment. They’re available from post offices, many retail stores and some financial institutions. Money orders are a popular option for people who don’t have a bank account or for those who want to send money securely without tying it directly to a personal bank account. Here are some key points about money orders:

  • Security: Money orders come with added security features to prevent fraud.
  • Limitations: There’s usually a maximum limit on the amount for which a money order can be issued.
  • Fees: Purchasing a money order usually involves a fee, which varies depending on where you buy it.
  • Receipts: When you purchase a money order, you receive a detachable receipt as proof of purchase.

Bank Draft

A bank draft, sometimes referred to as a banker’s draft, is a payment order wherein a bank guarantees the payment of the amount, similar to a check. Unlike money orders, which are prepaid, bank drafts are drawn against funds in a bank account. Key features of bank drafts include:

  • Trustworthiness: Since the bank itself issues the draft, it’s considered a more secure form of payment than personal checks.
  • Higher limits: Bank drafts can be made out for larger amounts, making them more suitable for big-ticket transactions.
  • Availability: Bank drafts are available exclusively through banks or financial institutions.
  • Fees: There might be a fee for obtaining a bank draft, depending on the bank and the customer’s account status.
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How Much Does It Cost for a Bank Draft?

Typically, fees for bank drafts range from $5 to $20. Some banks may waive this fee for premium account holders or for those who maintain a specific minimum balance.

You should always check with your bank to find out the fee before requesting a bank draft.

Money Order vs. Bank Draft: Pros and Cons

Here’s a side-by-side comparison to highlight the pros and cons of a money order and a bank draft.

Money Order – Secure and traceable
– Widely available
– Doesn’t require a bank account
– Fees can add up
– Amount limitations
Bank Draft – Guaranteed by the bank
– Suitable for large amounts
– Seen as more trustworthy than personal checks
– Must have a bank account
– Availability limited to banks

Final Take

Both money orders and bank drafts serve the purpose of ensuring secure and guaranteed payment methods. Your choice between them should be based on the amount you wish to send, where you want to obtain it and whether or not you have a bank account. Just as with choosing between different types of banking, it’s essential to understand the nuances of these financial tools. Being well-informed will always guide you to make the best decision for your unique financial situation.


Here are the answers to some of the most frequently asked questions about the differences between a money order and a bank draft.

  • What is the difference between draft and order?
    • The terms "draft" and "order" refer to the way in which payment is made.
      • A draft is a written order by one party directing another party to pay money to a third party. Bank drafts and personal checks are examples of drafts.
      • An order generally refers to a prepaid method of payment, like a money order, where the funds are provided upfront.
  • What is the difference between a cashier's order and a bank draft?
    • Both a cashier's order and a bank draft are payment orders issued and guaranteed by a bank. The primary differences are:
      • Origin of funds: For a cashier's order, the bank is responsible for the funds. The amount is directly withdrawn from the customer's account and held by the bank until the cashier's order is cashed. With a bank draft, the bank guarantees the amount but doesn't necessarily withdraw the funds from the customer's account immediately.
      • Usage: Cashier's checks are commonly used in the U.S., while bank drafts might be more prevalent in other countries or used for international transactions.
  • Can a bank draft be cashed by anyone?
    • Bank drafts are made out to a specific payee, meaning only the individual or entity named on the draft should be able to cash or deposit it. However, if the bank draft gets endorsed by the named payee, it can then be cashed or deposited by someone else.
    • It's essential to treat a bank draft with the same caution as cash. If lost, it can be a complicated process to get it replaced, and there's a risk that someone could fraudulently cash it if they find it and it's not yet endorsed. Always ensure that the named payee is accurate, and keep the bank draft safe until it's used.
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Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.


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