What is a Bank Draft in Portuguese?
A draft or bank draft is a payment instrument that is guaranteed by a bank. It is a written order from one bank to another bank to pay a specific amount of money to a named beneficiary. In Portuguese, this is called a "ordem de pagamento" or "draft".
How does a bank draft work?
- You request a bank draft from your bank. You will need to provide the name of the beneficiary, the amount of money to be paid, and the purpose of the payment.
- Your bank will issue the bank draft. This will be a written order to another bank to pay the beneficiary.
- The beneficiary can then present the bank draft to their bank. This bank will then contact the issuing bank to verify the order and make the payment.
Advantages of using a bank draft:
- Guaranteed payment: Since the bank draft is guaranteed by the issuing bank, the beneficiary can be sure that they will receive the payment.
- Security: A bank draft is a secure way to make payments, especially for large amounts of money.
- Convenience: Bank drafts can be convenient for both the payer and the payee.
Disadvantages of using a bank draft:
- Fees: Banks typically charge fees for issuing bank drafts.
- Processing time: There may be a processing time associated with getting a bank draft.
- Not widely accepted: While a bank draft may be accepted in certain situations, it is not as widely accepted as other forms of payment, like credit cards or electronic transfers.
Who uses bank drafts?
- Businesses: Businesses use bank drafts to make large payments, such as for inventory or equipment.
- Individuals: Individuals may use bank drafts for specific purposes, like paying for a property, a vehicle, or a large purchase.
What are the alternatives to using a bank drafts?
- Wire transfers: Electronic transfer of funds from one account to another.
- Money orders: A payment order that is similar to a bank draft but is not guaranteed by a bank.
- Cashier's checks: A check drawn on a bank's own funds and signed by a cashier.
In general, bank drafts are a reliable and secure form of payment. However, it is important to understand the advantages and disadvantages before using them.