Banker’s cheque

A banker’s cheque, also known as a bank draft, is a type of cheque issued by a bank, guaranteeing payment to the specified payee upon presentation.
Updated: May 30, 2024

3 key takeaways

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  • A banker’s cheque is a secure payment method where the bank guarantees the payment amount, ensuring that funds are available and valid.
  • It is typically used for significant transactions or where the payee requires a high level of assurance regarding payment.
  • Banker’s cheques are non-negotiable and can only be cashed or deposited by the named payee.

What is a banker’s cheque?

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A banker’s cheque, also known as a bank draft or cashier’s cheque, is a cheque issued by a bank on behalf of a customer, guaranteeing the payment of a specified amount to the payee. The funds are withdrawn from the customer’s account and held by the bank until the cheque is presented for payment. This makes banker’s cheques a reliable and secure method of payment, particularly for large or important transactions.

Understanding banker’s cheques in detail

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How they work:

  1. Issuance: A customer requests a banker’s cheque from their bank, specifying the amount and the payee. The bank withdraws the funds from the customer’s account and issues the cheque, which is drawn on the bank’s own funds.
  2. Payment guarantee: The bank guarantees that the cheque will be honored when presented for payment, as the funds are already secured by the bank.
  3. Presentation: The payee presents the banker’s cheque to their bank for deposit or cashing. The bank verifies the cheque and releases the funds to the payee.

Features of banker’s cheques:

  • Security: Banker’s cheques are considered more secure than personal cheques because they are backed by the issuing bank’s funds, reducing the risk of insufficient funds or fraud.
  • Non-negotiable: These cheques are non-negotiable, meaning they can only be cashed or deposited by the named payee, enhancing security and reducing the risk of theft or unauthorized use.
  • Validity period: Banker’s cheques typically have a validity period, usually three to six months from the date of issue. If not cashed within this period, the cheque may need to be revalidated or reissued by the bank.

Importance of banker’s cheques

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Banker’s cheques provide a secure and reliable method of payment, particularly for transactions where the payee requires assurance that the funds are guaranteed.


  • Guaranteed payment: The bank guarantees the payment amount, providing confidence to the payee that the cheque will be honored.
  • Security: Banker’s cheques reduce the risk of fraud and insufficient funds, making them suitable for large or critical transactions.
  • Acceptance: These cheques are widely accepted and trusted by individuals and businesses, facilitating smooth transactions.


  • Cost: Banks typically charge a fee for issuing banker’s cheques, which can be higher than fees for personal cheques or electronic transfers.
  • Inconvenience: Obtaining a banker’s cheque requires a visit to the bank, making it less convenient than some electronic payment methods.
  • Non-reversibility: Once issued, banker’s cheques cannot be easily canceled or stopped, unlike personal cheques or some electronic payments.

Real-world application of banker’s cheques

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Real estate transactions: Banker’s cheques are commonly used in real estate transactions to pay for property purchases or deposits, providing assurance to the seller that the funds are guaranteed.

Large purchases: For significant purchases such as vehicles, jewelry, or equipment, a banker’s cheque offers a secure method of payment, reducing the risk of fraud or bounced cheques.

Business transactions: Businesses use banker’s cheques to pay suppliers or settle large invoices, ensuring that the payment is secure and guaranteed.

Educational fees: Some educational institutions require payment of tuition fees or other charges via banker’s cheques to ensure the funds are guaranteed.

Legal settlements: In legal settlements or disputes, banker’s cheques are often used to make payments, providing assurance to all parties involved that the funds are secure and will be honored.

For further exploration, consider learning about the differences between banker’s cheques and other payment methods like personal cheques, electronic transfers, and money orders. Understanding these aspects provides valuable insights into when and why to use banker’s cheques for secure transactions.

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AI Financial Assistant
Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the knowledge base, understands over 100,000... read more.