A bank draft, also known as a banker's draft, is a payment instrument that guarantees payment to the beneficiary. It is essentially a check drawn by a bank on its own funds, making it a safe and secure way to make payments, especially for large transactions or when dealing with parties you don't know well.
What is a Bank Draft?
A bank draft is a written order from a bank instructing it to pay a specific amount of money to a designated person or entity. It is different from a regular check in that it is drawn on the bank's own funds, not on the account of the person who purchases it. This means that the beneficiary is guaranteed payment, as long as the bank has sufficient funds.
How does a Bank Draft work in Malaysia?
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Application: You approach a bank and request a bank draft. You will need to provide the bank with:
- The name of the beneficiary
- The amount of money you want to send
- The purpose of the payment
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Payment: You pay the bank the amount of the draft plus a small fee.
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Issuance: The bank issues the draft, which is a document with the bank's name and details, the amount, and the beneficiary's name.
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Delivery: You deliver the bank draft to the beneficiary, who can then deposit it into their bank account or present it for payment at the bank.
Benefits of Using a Bank Draft in Malaysia:
- Guaranteed Payment: The bank guarantees payment, making it a secure way to make payments, especially for large transactions.
- Credibility: It is a reliable payment instrument that adds credibility to your transaction.
- Security: Reduces the risk of fraud and bounced checks.
- Convenience: Easy to use and convenient for both the sender and the receiver.
When to use a Bank Draft in Malaysia:
- Large Transactions: For high-value transactions, such as property purchases or business deals.
- Dealing with Unknown Parties: When you are dealing with individuals or entities you don't know well.
- International Transactions: To make payments to parties in other countries.
- Payments for Specific Purposes: For example, paying for school fees or taxes.
Conclusion:
Bank drafts are a safe, secure, and reliable payment instrument available in Malaysia. If you are making a significant payment or dealing with parties you don't know well, a bank draft can provide peace of mind and ensure a smooth transaction.