You’re standing at the bank, nervously gripping a folder full of paperwork, about to hand over a life-changing down payment, and the teller asks, "Certified cheque or bank draft?"

Wait — what’s the difference?

These two payment methods may seem interchangeable, but they have important distinctions that can impact everything from fees and fraud protection to the speed of your transaction. And when you're dealing with big-ticket transactions — like buying a car or closing on a home — you want to ensure you're choosing the option that's safest, fastest, and most cost-effective.

In this guide, we’ll break down:

• What certified cheques and bank drafts actually are
• The exact steps to get each one (with requirements and best practices)
• Pros and cons: cost, convenience, security, and more
• A side-by-side comparison table of key features
• When to use each payment method, and when to consider a money order instead

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What is a certified cheque?

A certified cheque is a personal cheque that has been guaranteed by the bank and verified for sufficient funds. This means that the bank sets aside the amount specified on the cheque to ensure that it can be paid out when presented for payment.

Requirements for getting a certified cheque

There are a few boxes you'll need to tick off before you can be certain you're qualified to get a certified cheque:

1. A personal cheque from your bank account.
2. Sufficient funds in your account to cover the amount of the certified cheque.
3. Identification for verification purposes, such as a government-issued ID.
4. A fee for the certification process, which varies by bank.

Once you have met these requirements, you can request a certified cheque from your bank. Processes and requirements may vary depending on the bank, so it's best to check with your specific bank for their procedures.

How to get a certified cheque step-by-step

1. Gather necessary documents: Before heading to the bank, make sure you have all the required documents, including your bank account information and sufficient funds in your account.
2. Visit your bank: Go to your bank and approach a teller or customer service representative. Let them know that you would like to request a certified cheque.
3. Verify details: The bank may request additional verification, such as identification, so be prepared to provide it if necessary.
4. Provide payment: You will need to pay a fee for the certification process, which can vary by bank. Make sure you have enough funds in your account to cover this fee.
5. Wait for processing: Once all requirements are met and payment is provided, the bank will process your request. This may take a few days, so plan accordingly.
6. Receive certified cheque: Once processed, you will receive a certified cheque from the bank. Check that all details are correct before using it.

Best practices for using a certified cheque

Certified cheques can be a valuable tool for ensuring secure and guaranteed payment, but you’ll need to follow best practices when using them. Here are some tips to keep in mind:

• Verify the authenticity of the cheque: Before accepting a certified cheque from someone, ensure it is genuine and not counterfeit. Look for security features such as watermarks, holograms, and microprinting.
• Keep track of your certified cheques: Keep a record of each certified cheque you receive or issue, including the date, amount, and recipient. This will help you keep track of your finances and prevent any discrepancies.
• Use certified cheques for large transactions: Certified cheques are typically used for large transactions, such as buying a car or making a down payment on a house. They provide a level of security and assurance to both the buyer and seller.
• Be cautious when accepting certified cheques from strangers. If you receive a certified cheque from someone you do not know, exercise extra caution and take steps to verify its authenticity. Scammers may try to use counterfeit certified cheques to defraud unsuspecting individuals.

Certified cheques are popular for a reason;  they provide a guarantee of funds. However, it is essential to remember that they are not immune to fraud and scams. By being vigilant and taking the necessary precautions, you can protect yourself from falling victim to fraudulent activities involving certified cheques.

Pros and cons of certified cheques

Pros:

• Guaranteed funds: As mentioned earlier, certified cheques provide a guarantee of payment as the issuing bank backs them.
• Widely accepted: Certified cheques are recognized and accepted by most financial institutions, making them a convenient form of payment.
• Secure form of payment: They are considered more secure than regular personal or business cheques, as they require verification and approval from the issuing bank before being issued.

Cons:

• Costly fees: There may be fees associated with obtaining a certified cheque, which can vary depending on the amount and institution.
• Time-consuming: It may take some time for the funds to become available in your account after depositing a certified cheque. This wait can be inconvenient if you need access to the funds quickly.
• Limited in use: Certified cheques can only be used for particular transactions, such as large purchases or when a seller requires a guaranteed form of payment. They cannot be used for everyday expenses, such as regular cheques or debit cards.

What is a bank draft?

A bank draft, also known as a cashier's cheque or treasurer's cheque, is a guaranteed payment instrument issued by a bank on behalf of its customer. Unlike a certified cheque, the funds for a bank draft are deposited directly from the issuer's account and not just set aside.

Requirements for obtaining a bank draft

To obtain a bank draft, you will typically need to have an account with the issuing bank or be willing to pay the full amount upfront.

How to get a bank draft step-by-step

The process for getting a bank draft may vary slightly depending on the specific policies of your chosen financial institution. However, here are the general steps involved:

1. Visit your local branch or log into your online banking account.
2. Request a bank draft from a customer service representative or select the option to request one online.
3. Provide the required information, including the recipient's name and address, the amount of the draft, and any other necessary details.
4. Pay for the bank draft by transferring funds from your account or paying in cash.
5. Wait for the bank draft to be processed, which typically takes 1-2 business days.
6. Once processed, collect your bank draft and deliver it to the intended recipient.

Best practices for using a bank draft

To ensure a smooth and successful process when a bank draft is issued, follow these best practices:

• Verify recipient information: Make sure you have the correct name and address of the recipient before requesting a bank draft. This will help avoid any delays or complications in delivering the draft.
• Keep track of fees: Banks may charge a fee for issuing a bank draft, so be aware of these costs beforehand. Check if there are additional fees for international transfers.
• Budget for processing time: As mentioned earlier, it typically takes 1-3 business days for a bank draft to be processed. If you need the funds urgently, it's best to plan ahead and request the draft in advance.
• Keep the bank draft secure: Once you receive the bank draft, keep it in a safe place until you are ready to use it. Treat it like cash and do not share any information about it with others.

Pros and cons of bank drafts

Pros:

• Secure form of payment: Bank drafts are considered one of the most secure forms of payment, as they cannot be cancelled or reversed once issued.
• No risk of bouncing: Since bank drafts are paid for upfront, there is no risk of them bouncing like personal checks.
• Accepted internationally: Bank drafts can be used for international transactions and are commonly accepted by banks worldwide.
• Can be replaced if lost or stolen: If your bank draft is lost or stolen, you can request a replacement from your bank.

Cons:

• Fees may apply: Banks may charge fees for issuing a bank draft, which could add to the cost of your transaction.
• Processing time: As mentioned earlier, it takes 1-2 business days for a bank draft to be processed. This could delay your transaction if you need the funds immediately.
• Limited use: Bank drafts are typically used for larger transactions and may not be convenient for smaller purchases.
• Not as secure as other payment methods: While bank drafts are relatively safe, they may not offer the same level of security as other payment methods like wire transfers or online payments.

Alternatives to bank drafts and certified cheques

If you are unable to obtain a bank draft or prefer an alternative method of payment, there are some other options available to consider:

• Money order: A money order is similar to a certified cheque in that it is guaranteed by the issuing institution. However, instead of using funds from your personal account, you can pay for a money order with cash or debit.
• Cashier’s cheque: This type of cheque is issued by a bank and is guaranteed by the bank itself. It may require a larger fee than a certified cheque, but it can be helpful if you need to make large payments.
• Wire transfers: Similar to electronic transfers, wire transfers involve moving funds electronically between two bank accounts. However, wire transfers usually have higher fees and are more commonly used for international transactions.
• Cashier's order: This is a secure form of payment similar to a cashier's cheque, but issued by non-bank financial institutions, such as credit unions or trust companies.

Of course, online payments make sending money even easier. Many banks offer online bill pay services, allowing you to send payments electronically to businesses and individuals.

Certified cheques vs bank drafts: comparison

Fees

• Certified cheques: Fees can range from $5 to $25 per cheque.
• Bank drafts: Fees typically range from $10 to more, depending on the bank.

Security

• Both certified cheques and bank drafts provide a high level of security as they are guaranteed by the issuing institution.
• Certified cheques are signed by a bank official, while bank drafts are drawn directly from the issuing bank's account.
• This means that both forms of payment are considered to be as good as cash.

Clearing time

• Certified cheques: Usually take 1-2 business days to clear.
• Bank drafts: Typically take longer to clear, with some banks taking up to 5 business days.

Convenience

• Certified cheques and bank drafts both offer a convenient way to make large payments without having to carry cash or use online banking services.

Acceptance

• Both certified cheques and bank drafts are widely accepted forms of payment, making them a reliable option for transactions.

Limitations

• Certified cheques and bank drafts cannot be cancelled or stopped once issued, so ensure the accuracy of information before requesting one.
• They also have expiration dates, which can vary from 6 months to a year depending on the institution. If the cheque or draft is not used within this time frame, it will need to be reissued.

When to use a bank draft vs. a certified cheque vs. a money order

When deciding between a bank draft, certified cheque, or money order, you'll need to consider the specific requirements of your transaction. Here are the key factors to guide your choice:

• Security and fraud prevention: Bank drafts and certified cheques are generally more secure and less susceptible to fraud due to their verification by the issuing bank. Money orders, while secure for small amounts, may not offer the same level of protection for larger transactions.
• Transaction amount: For large-value transactions, certified cheques or bank drafts are commonly the preferred choice since money orders typically have a maximum issuance limit.
• Cost: Money orders usually come with lower fees, making them an affordable option for small transactions. Bank drafts and certified cheques, on the other hand, may involve higher fees due to the added security features.
• Speed: If your transaction requires immediate or same-day processing, certified cheques can be advantageous as they are quicker to prepare. Bank drafts may take slightly longer due to additional verification steps.
• Recipient's preference: Check with the recipient to understand their preferred payment method. Some businesses or individuals may favour a bank draft or certified cheque for their reliability and formal nature, while others might accept money orders for simpler transactions.

Carefully evaluate these factors to ensure the payment method aligns with your needs and offers the right balance of cost, convenience, and security. Here's a quick overview of generally accepted practice for what each transaction vehicle should be used for:

Bank drafts should be used for:

• Large or high-value transactions
• International payments
• Real estate purchases
• Business-to-business transactions

Certified cheques should be used for:

• Large or high-value transactions
• Real estate purchases
• Business-to-business transactions

Money orders should be used for:

• Smaller personal transactions
• Rent payments
• Utility bills

These guidelines are not set in stone and may vary depending on the specific circumstances of each transaction. For example, some individuals or businesses may be more comfortable with a certified cheque rather than a bank draft for a significant transaction, while others may prefer using money orders for all their payments.

Make your next big purchase stress-free with Lotly

First, let's recap some key takeaways:

• Decide based on transaction size, speed, and recipient preference. Certified cheques are faster to get, while bank drafts are more secure and preferred for international or high-value deals.
• Expect both certified cheques and bank drafts to incur fees, experience processing delays, and have additional fraud safeguards in place. While both are backed by a bank, drafts pull funds immediately, making them slightly more secure but slower to clear.
• Use money orders for smaller payments and certified/bank cheques for larger ones. Each has its ideal use case, so matching the method to the transaction ensures you get the right mix of cost, convenience, and protection.

If you're a homeowner in need of cash for those major upcoming transactions, Lotly can help. We work with over 50 lenders from across Canada to find you the best home equity loan and HELOC options tailored to your financial goals and situation. Book a free consultation today to discover how we can help.

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