Money order vs bank draft refers to the difference between two of the most common methods for sending money in Canada.
In this article, we’re going to compare both options and discuss which scenarios are best suited for each.
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Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Money Order vs Bank Draft
- What Are the Benefits of a Money Order?
- What Are the Benefits of a Bank Draft?
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Money Order vs Bank Draft
The main difference between a money order and a bank draft is that a money order is limited to CAD 999.99 while a bank draft has no limit. For this reason, bank drafts are commonly used to complete large transactions, such as down payments for real estate or purchasing cars. Additionally, in Canada, bank drafts are only available from financial institutions while money orders can be obtained via the post office.
Another major difference between a money order vs a bank draft is that you need a bank account in order to obtain a draft. Comparatively, anyone can purchase a money order and a bank account is not required.
That said, both money orders and bank drafts are considered secure forms of payment and are commonly used in Canada. They are secure because the issuing entity (e.g. bank or Canada Post), has guaranteed payment to the recipient of both forms of payment.
Alternatively, if you’re looking to set up a payment process, it’s important to know that the branch number is the same as the transit number and provides the exact address of your bank account, which is required during the setup process.
If you plan on making frequent domestic transfers and want to know how to transfer money between banks in Canada successfully, you can access our free guide linked here to learn how.
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What Are the Benefits of a Money Order?
Money orders are often seen as a more cost-effective solution compared to traditional wire transfers. Additionally, because they are purchased and paid for before sending, they are a guaranteed form of payment for the recipient. Lastly, because the payee is not required to have a bank account to obtain a money order, they are often viewed as a safer option when it comes to protecting the payee’s personal information.
What Are the Benefits of a Bank Draft?
Bank drafts are commonly used for completing large financial transactions. With this in mind, one of the biggest benefits of a bank draft is that they are not capped. Additionally, like money orders, bank drafts are a guaranteed form of payment to the recipient. This is because the funds are immediately withdrawn from the payee’s account when they are obtained.
Frequently Asked Questions
Below are three of the most common questions that we receive from people comparing a money order vs a bank draft. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Is Safer a Money Order or a Bank Draft?
Both money orders and bank drafts are considered safe forms of payment. However, both are susceptible to fraud. In most cases, bank drafts are used when completing a large financial transaction, such as purchasing a home or an automobile. On the other hand, money orders are typically used for personal transactions below the CAD 999.99 threshold.
What Are the Disadvantages of a Bank Draft?
Because a bank draft is treated like cash, they are more prone to fraud than other forms of payment. Additionally, delivering a bank draft is often considered the conclusion of a transaction. So after a draft is delivered to the recipient, it cannot be canceled by the payee. That said, bank drafts are not the only form of payment that faces these issues. In fact, when considering money order vs bank draft, similar disadvantages plague both forms of payment.
Is a Bank Draft Considered Cash?
Bank drafts are considered to be like cash and are treated as such by banks. So, they can be deposited at any bank. For this reason, if a bank draft is ever misplaced, the individual who originally requested the bank draft should request a stop as soon as possible.
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