Siddhi Bagwe
Sandra MacGregor
Beth Buczynski
Bank drafts, certified cheques and money orders are payment alternatives that you can use when using cash is not feasible or safe.
When comparing bank drafts versus certified cheques versus 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. It’s available in numerous currencies.
How bank drafts work in Canada
When you buy a bank draft, your financial institution immediately withdraws the amount from your account and puts it on hold — guaranteeing payment to the recipient — until the draft is presented for payment. Once a bank draft is delivered to the payee, it can’t be cancelled.
Bank drafts are commonly used for large purchases, such as when buying a car or real estate.
If the bank draft is lost before reaching the payee, you could potentially replace it — though you may need to provide a Bond of Indemnity as insurance against loss for the bank.
A bond of indemnity, also known as a surety bond, is a form of insurance the buyer of a bank draft can get from any licensed insurance firm in Canada. The bond of indemnity covers the issuing bank against losses if a missing draft is found and handed in for payment.
Bank draft fees
Bank draft fees vary based on your financial institution and type of account. The charges may be as low as $0 for premium bank account holders or as high as $12.50 for other accounts or drafts over a certain amount. Additionally, bank drafts in a foreign currency may 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 availability of the funds by verifying your chequing account balance and putting a hold on the amount.
How certified cheques work in Canada
A normal cheque can be considered a certified cheque if the bank stamps it with its official seal. Once a certified cheque is issued, it can’t be cancelled.
Individuals and businesses typically use certified cheques to conduct large transactions.
Certified cheque fees
A certified cheque can cost between $10 and $20 depending on the type of financial institution and account.
However, 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 assured payment method that can be used in place of cash or a personal cheque. These are only available in a limited number of currencies, which include United States dollar (USD), Chinese renminbi (RMB) and Indian rupee (INR).
How money orders work in Canada
To send a money order, you’ll need to visit a bank, credit union or Canada Post office and bring your debit card or enough cash to cover the service fees and the amount you wish to transfer. You’ll also need to provide the payee’s personal information. Once the money order is sent, the payee can visit a post office or bank to cash it.
In Canada, money orders are often used by those who may not have a chequing account and thus can’t send or receive payments via Interac e-transfers. Money orders are also one of the preferred and cost effective ways to send money internationally. The amount per money order is generally limited to CAD 999.99.
Money order fees
Money orders typically cost around $10, depending on the institution.
Comparing bank drafts, certified cheques and money orders
Here’s a breakdown of basic similarities and differences between the bank draft, certified cheque and money order payment methods:
Bank draft vs. certified cheque
| Similarities | Differences |
|---|---|
| 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 whether 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
| Similarities | Differences |
|---|---|
| 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 amount limits. Money orders may be limited to CAD 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 or bring it to a branch of the institution that issued it for verification.
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 may be limited to CAD 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 hasn't 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 your payee’s accepted mode of payment 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.
FAQs about bank drafts, certified cheques and money orders
Bank drafts, certified cheques and money orders are all secure payment alternatives to using cash, but differ in availability, amount limits and cost.
Bank draft fees may cost anywhere from $0 to $12.50 based on your financial institution and the type of account you hold. Additionally, bank drafts bought in a foreign currency will be subject to currency conversion fees.
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