Bank drafts, certified cheques, and money orders are secure ways to pay for purchases that are too big for a single credit or debit transaction. They differ in who guarantees the funds, how the funds are held, processing time, and fees.
We’ll compare these payment types and explain when Canadians should use bank drafts, certified cheques, or money orders.
Key Takeaways
- Bank drafts, certified cheques, and money orders are all secure payment methods.
- Bank drafts and certified cheques can be purchased at banks and credit unions.
- Money orders can be purchased at banks, credit unions, and Canada Post locations.
- All three require a fee.
Bank draft vs. certified cheque vs. money order
| Payment type | Issuer | Amount limit | Fees | Funds held | Processing time | Guaranteed by |
|---|---|---|---|---|---|---|
| Bank draft | Financial institution | None | $0 - $9.95 | Yes - in a reserve account | 1-5 business days | Issuing institution |
| Certified cheque | Financial institution | None | $10 - $20 | No - paid for in advance | 1-5 business days | Issuing institution |
| Money order | Financial institution or Canada Post | $999.99 | $7.50 - $9.95 | No - funds are frozen in buyer's account | Instantly | Sender |
Breakdown of comparison: All three of these financial products are guaranteed in one way or another, making them extremely secure payment types.
Each product requires that you visit a physical location to purchase the item. All be used for formal transactions, professional relationships, or personal use.
On the other hand, each of these products differs in who guarantees the funds, how the funds are held, processing time, and fees.
What is a bank draft?
In Canada, a bank draft is a payment method where the issuing institution guarantees the funds. It's typically used when large payments are required, like when you're buying a car, purchasing real estate, or making tuition payments.
You must physically go into a bank or financial institution to request a bank draft. A staff member will provide you with a slip of paper (similar to a cheque) and this is the bank draft.
The recipient named on the bank draft is the only person who can cash and deposit the funds.
Bank draft fees
Bank draft fees in Canada range from $7.50 to just under $10, depending on the institution. Some banking plans include fee bank drafts.
- BMO bank draft fee: $9.95
- CIBC bank draft fee: $9.95
- National Bank bank draft fee: $9
- RBC bank draft fee: $9.95
- Scotiabank bank draft fee: $9.50
- TD bank draft fee: $9.95
Examples of when to use a bank draft
- Making a down payment on a car, house, etc.
- Making a deposit on an apartment or other rental property
- Paying a deposit to a contractor
- Sending a payment to someone in another country
- Conducting business transactions (especially with new partners/clients)
What is a certified cheque?
Certified cheques in Canada are similar to personal cheques but they are guaranteed by the bank or financial institution that issues them. Most banks and credit unions can issue certified cheques, but you'll have to go to a physical branch location to request one.
First, the bank employee will authorize the cheque with an official stamp, mark, or special signature. Once this is done and you've paid the fee, you can hand the certified cheque over to the intended recipient.
This payment type is sometimes also referred to as a cashier's cheque.
Certified cheque fees
Fees for certified chequing in Canada range from $10 to $20, but some banking plans include them for free or offer a discounted rate.
- BMO certified cheque fee: $20
- National Bank certified cheque fee: $25
- Scotiabank certified cheque fee: $15
- TD certified cheque fee: $10
Examples of when to use a certified cheque
- Paying closing costs when purchasing a house
- Buying a car, boat, or other expensive vehicle
- Making a security deposit for an event booking or equipment rental
- Repaying a loan to a friend or family member
- Paying government fees
What is a money order?
A money order is a prepaid and guaranteed payment method, typically issued by a financial institution or post office.
To purchase a money order, tell the issuing employee the amount you'd like the order made for. Then, pay this amount plus the service fee. You can pay with cash or debit card, but never with a credit card.
Only the intended recipient can cash a Canadian money order. It must be cashed or deposited at either a bank or post office.
Money order fees
The typical cost for a money order ranges from $5 to just under $10. Some premium banking plans include free or discounted money orders.
- Canada Post: $8.50
- BMO certified money order fee: $5
- CIBC certified money order fee: $9.95
- Scotiabank money order fee: $7.50
- TD money order fee: $9.95
Examples of when to use a money order
- Paying a bill, especially if sending payment through the mail
- Sending a financial gift to a friend or relative
- Making payment to someone who doesn't have or prefers not to use a bank account
- Purchasing a second-hand item (when you want to keep your personal banking info private)
- Paying rent
How to choose between bank drafts, certified cheques, and money orders in Canada
To determine whether a bank draft, certified cheque, or money order is the right product for your situation, you should consider how their unique features relate to the specific transaction you want to make.
Asking the following questions can help you make this choice:
- Does the recipient have a preferred method of payment?
- Do you and/or the recipient have a chequing account?
- What amount are you willing to pay in fees?
- Does the payment need to be guaranteed in some way?
- Is there a bank branch located near you?
Here are a few sample scenarios and recommendations for which of these financial products is the right one to use:
- Buying a car, TV, or another large purchase: Bank draft
- Sending a gift to a family member or friend: Money order
- International transactions: Bank draft
- Making business transactions (paying suppliers, contractors, etc.): Certified cheque
- Real estate deposits: Bank draft
- Paying bills: Money order
- Rent/security deposits: Certified cheque
Bank drafts vs. certified cheques by bank
Here are a few comparisons of the details regarding bank drafts and certified cheques from some of Canada's major banks:
Bank draft vs. certified cheque RBC
| Payment type | Fee | Processing time | Can it be refunded? |
|---|---|---|---|
| Bank draft | $9.95 | TBD | No |
| Certified cheque | $20 | 4-5 | TBD |
TD certified cheque vs. bank draft
| Payment type | Fee | Processing time | Can it be refunded? |
|---|---|---|---|
| Bank draft | $9.95 | Up to 6 days | Partial |
| Certified cheque | $10 | Up to 6 days | TBD |
Bank draft vs certified cheque CIBC
| Payment type | Fee | Processing time | Can it be refunded? |
|---|---|---|---|
| Bank draft | $9.95 | 4 days | TBD |
| Certified cheque | N/A | N/A | N/A |
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.The pros and cons of bank drafts, certified cheques, and money orders
The pros and cons of these 3 financial products focus mostly on their fees, security features, and processing or clearing times. You'll definitely want to consider these factors when determining which option best fits your needs.
Bank drafts
| Pros | Cons |
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Certified cheque
| Pros | Cons |
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Money orders
| Pros | Cons |
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FAQ
What's the difference between a money order, bank draft, and a certified cheque?
There are several differences between money orders, bank drafts, and certified cheques. Specifically, bank drafts and certified cheques are available at banks and come with their guarantee. On the other hand, money orders can be purchased at Canada Post or banks, but their guarantee is provided solely by the sender..
Can you get a bank draft or certified cheque online?
No, you can only get bank drafts or certified cheques by visiting a bank, credit union, or other financial institution. The bank or institution needs to verify your identity in person before guaranteeing the payment method.
Does a bank draft or certified cheque cost more?
This depends on the bank or institution where you get the draft or cheque. Certified cheques cost between $10 and $20, and bank drafts can be up to $12.50, but some premium chequing accounts include free bank drafts.
What is a money order?
A money order is a prepaid, secure form of payment that can be purchased at a financial institution or Canada Post location. It's a paper document used for safe and convenient transactions in place of personal cheques.
What is a bank draft?
A bank draft is a payment method issued and guaranteed by a bank, credit union, or other financial institution. The institution guarantees the funds so the payment is secure and suitable for high-value or international transactions.
What is a certified cheque?
Similar to a bank draft, certified cheques are secure payment methods issued by banks and financial institutions. The institution certifies that the funds are available, making this a convenient payment method for transactions that require large, secure payments.
How much does a bank draft cost?
Bank drafts typically cost between $0 and $10, depending on which bank you use and what kind of account you have. Some premium accounts provide you with a certain number of bank drafts for free each year.
How much does a money order cost?
Depending on which institution you bank with and what type of account you have, a money order will cost you between $0 and $10. There are some premium accounts that offer free money orders for account holders.
How much does a certified cheque cost?
Prices for certified cheques vary between banks but is usually somewhere between $10 to $20. As with bank drafts and money orders, some premium chequing accounts offer free certified cheques and other perks for account holders.
Can I cancel a bank draft?
In most cases, a bank draft can be canceled. If it gets lost or destroyed, it can be canceled, too. Contact your bank to start the process.
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