Bank Draft vs Money Order: What’s the Difference?

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Ever found yourself needing a secure way to send money but you’re unsure whether to go with a bank draft vs money order? You’re not alone! Both options guarantee that the recipient gets paid, but each works a bit differently. Understanding how each function can save you money and help you pick the right option for your needs.

This guide breaks it all down, helping you make a smart choice when sending money securely.

What is a Bank Draft?

A bank draft, sometimes called a banker’s draft, is a payment order wherein banks guarantee the payment of the amount, similar to a check.

Unlike prepaid money orders, however, bank drafts are drawn against a bank account’s funds.

What is a 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.

Key Differences Between Money Orders and Bank Drafts

Both money orders and bank drafts are secure payment methods, each catering to different needs and offering 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 are some key points about and drafts and money orders:

How Much Do Bank Drafts Cost?

Typically, bank draft fees range from $5 to $20. Some banks waive fees for premium account holders or those maintaining a specific minimum balance.

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

Security Features: Bank Draft vs. Money Order

The primary selling point for both bank drafts and money orders is their safety compared to making transactions via methods like cash or check.

Let’s deep-dive into the security features of both:

How Safe Is a Bank Draft?

• Since bank drafts are issued by financial institutions, they’re backed by verified funds. That means no bounced payments.
• The bank withdraws the money from your account before issuing the draft, making it very secure.
• However, counterfeit drafts do exist, so always double-check with the issuing bank before accepting one.

How Secure Is a Money Order?

• Money orders are prepaid, so they won’t bounce.
• If you lose one, you can trace and cancel it — as long as it hasn’t been cashed yet.
• That said, money orders are more prone to fraud than bank drafts. Scammers can create fakes, so always verify before accepting.

Potential Risks:

• Bank Drafts: Less fraud risk, but counterfeits do exist.
• Money Orders: Higher risk of fraud; always verify before accepting.

Cost and Fees: Comparing Bank Drafts and Money Orders

Here’s an easy breakdown of the financial basics when it comes to bank drafts and money orders:

Why Do Bank Drafts Cost More?

Since they’re issued by a bank and backed by cleared funds, bank drafts come with a higher price tag.

What Affects Money Order Costs?

• The price varies based on where you buy it (post office, bank, or retail store).
• Some locations charge higher fees for larger amounts.

When to Use a Bank Draft and When to Use a Money Order

There’s a time and place for everything; that same concept applies to bank drafts vs money orders too. Here’s a quick breakdown of which one you should opt for when you need it:

Go With a Bank Draft If You…

• Need to make a large payment (like buying a house or car).
• Are sending money internationally.
• Want extra security and legitimacy for the transaction.

Opt for a Money Order If You…

• Need to make a small payment (under $1,000).
• Want a secure way to pay without a bank account.
• Are paying a bill that doesn’t accept checks.

International Payments: Bank Draft vs. Money Order

Looking to send some money over the border? Here’s a handy guide for each when it comes to sending bank drafts and money orders overseas:

How to Cash a Bank Draft Without a Bank Account

If you receive a foreign bank draft and don’t have a bank account, cashing it can be tricky. Some options include:

• Visiting the issuing bank to cash it directly.
• Using a check-cashing service, though they may charge high fees.
• Depositing it into a prepaid debit card if the provider allows it.

How to Obtain a Bank Draft and Money Order

Now that you know the ins and outs of each, how do you go about actually getting yourself a bank draft or money order?

How to Get a Bank Draft: Step-by-Step

1. Visit your bank or credit union.
2. Request a bank draft and provide the recipient’s details.
3. The bank will withdraw the funds from your account immediately.
4. Receive your draft and send it to the recipient.

How to Get a Money Order: Step-by-Step

1. Go to a post office, bank, or retailer (like Walmart or Western Union).
2. Pay the amount you need, plus a small fee.
3. Fill in the recipient’s details and keep the receipt.
4. Send the money order where it needs to go.

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:

Final Take to GO

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. Consider your budget, security needs and payment accounts, and you’ll be good to GO!

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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