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Published September 6, 2022

Bank Draft vs. Certified Cheque vs. Money Order: Key Differences to Know

They’re all secure payment options that avoid using cash, but bank drafts, certified cheques and money orders differ in availability, amount limits and cost.

Bank drafts, certified cheques and money orders are alternative forms of payment when using cash wouldn’t be feasible or safe.

When comparing bank drafts vs. certified cheques vs. money orders, the main factors to consider are availability, fees and the amount of money you need to send.

What is a bank draft?

A bank draft is a secure, physical form of payment to a third party that is guaranteed by the issuing bank or credit union.

Unlike a personal cheque, when you buy a bank draft, your financial institution immediately withdraws the amount from your account and holds it in a reserve account — essentially guaranteeing the payment to the recipient — until the draft is presented for payment.

Bank drafts are commonly used to make large payments (such as when buying a car or real estate) and are available in numerous currencies.

Once a bank draft is delivered to the payee, it can’t be cancelled. If it’s lost before it’s given to the payee, you potentially could replace it — though you may be required to provide a Bond of Indemnity as insurance against loss for the bank.

Fees for bank drafts vary based on your financial institution and type of account, and may be as low as $0 (if you have a premium bank account) or as high as $9.95. If you get a bank draft in a foreign currency, you will also be subject to currency conversion fees.

What is a certified cheque?

A certified cheque is one that’s guaranteed by the issuing financial institution. The bank guarantees the availability of the funds by verifying that you have the money in your chequing account and then putting a hold on the funds so they can’t be otherwise used. A normal cheque can become certified if a bank stamps it with its official seal. Once a certified cheque is issued, it can’t be cancelled.

Depending on the type of account you have, fees can be as high as $20 per certified cheque. Due to the popularity of Interac e-transfers, some banks no longer offer certified cheques drawn on personal accounts.

What is a money order?

A money order is another guaranteed form of payment that can be used in place of cash or a personal cheque.

In Canada, money orders are more commonly used by people who may not have a chequing account (and thus can’t send or receive payments via Interac e-transfers) or by those who want to send money internationally for less than the cost of a wire transfer. In addition to being available at financial institutions, money orders can also be bought and cashed at Canada Post outlets.

Generally, the amount per money order is limited to $999.99.  Money orders are only available in a limited number of currencies. Fees may range from $7.50 to $9.95.

How to compare bank drafts, certified cheques and money orders

The main differences between bank drafts, certified cheques and money orders involve their fees, availability and allowable amounts. Here’s a breakdown of what makes these payment methods different from one another.

Bank draft vs. certified cheque

SimilaritiesDifferences
Guaranteed by a financial institution.Some banks have stopped issuing certified cheques.
Money in your account is put on hold to cover the payment.Certified cheques may have higher fees.
Can't be cancelled or stopped.
Can be subject to fraud and misuse, such as forgery.

If you’re not sure a bank draft or certified cheque is real, you can call the issuing bank. The Canadian Bankers Association website has good tips to protect yourself from fraud.

Bank draft vs. money order

SimilaritiesDifferences
Guaranteed by a financial institution or Canada Post.Bank drafts are only available at financial institutions, whereas money orders are also available at Canada Post outlets.
Fee is charged.Bank drafts have no limits and can be used for very large purchases like real estate and cars. Money orders are limited to $999.99.
Can be counterfeited.You don’t need a bank account to get a money order.
A bank draft can’t be cancelled or stopped once it’s delivered to the payee. A money order can be refunded as long as it has not been cashed.
Money orders may only be available in a limited number of currencies.

To check whether a bank draft or money order is valid, look for things like watermarks and altered dollar values.

Certified cheque vs. money order

Similarities Differences
Guaranteed by a financial institution or Canada Post.Certified cheques are only available at financial institutions, whereas money orders are also available at Canada Post outlets.
Can be subject to fraud.Money orders may be easier to buy as some banks no longer offer certified cheques.
Money orders are limited to $999.99.
You need a chequing account to get a certified cheque but anyone can buy a money order.
A certified cheque can’t be cancelled or stopped once issued. A money order can be refunded as long as it has not been cashed.

If you suspect fraud, you can contact the bank or post office to confirm the validity of a money order or certified cheque.

Choosing between bank drafts, certified cheques and money orders

When deciding which form of payment is best, asking the following questions may be helpful:

  • What is the payee willing to accept? Certain large transactions may require a bank draft, certified cheque or money order to guarantee availability of funds. Be clear about what your payee will accept before choosing.
  • What level of flexibility and security do I need? If you’re worried about potential forgery, or want the ability to cancel the payment, it could impact your decision.
  • Do I have access to a chequing account? If not, a money order may be your only option.
  • How much am I willing to pay in fees? Unlike writing a personal cheque, each of these forms of payment could incur an extra fee.
  • Where can I buy it? Given the popularity of electronic money transfers, some banks no longer offer these cash alternatives. Money orders, however, are commonly available at Canada Post locations.

About the Author

Sandra MacGregor

Sandra MacGregor has been writing about personal finance, investing and credit cards for over a decade. Her work has appeared in a variety of publications like the New York Times, the UK Telegraph, the Washington Post, Forbes.com and the Toronto Star. You can follow her on Twitter at @MacgregorWrites.

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