Bank Drafts and Money Orders

Jurisdiction: Country: Canada | Province/State: Alberta

What is a Bank Drafts and Money Orders?

A bank draft and a money order are prepaid paper payment instruments. You buy them from a financial institution or authorized issuer, who guarantees payment to the named payee. You hand the draft or money order to the person or business you want to pay. They deposit it like a cheque.

A bank draft is issued by a bank or credit union. The issuing bank withdraws the funds from your account and sets them aside. The draft is then “drawn on” the bank itself. This makes it a form of guaranteed funds.

A money order is also prepaid. It is usually issued by a bank or a retail issuer. You pay cash or debit at the counter. Money orders are often used for smaller amounts and for everyday payments. They also count as guaranteed funds.

Who typically uses this form?

Home buyers, tenants, landlords, private sellers, solo and small firms, and small businesses. You see them in real estate deposits, vehicle sales, rent payments, legal retainers, and settlement payouts. Government bodies and courts may also accept them for fees. In Alberta, bank drafts are common in real estate deals, where “certified” or “guaranteed” funds are expected.

Why would you need this form?

You need it when the recipient insists on guaranteed funds. They want certainty that the payment will clear. Personal cheques can bounce. E-transfers may have limits. Wire transfers can be costly or create timing friction. A bank draft or money order gives the recipient comfort that the funds exist and are reserved.

Typical usage scenarios include

• Submitting a deposit with an offer to purchase a home.
• Paying a damage deposit and first month’s rent to a landlord.
• Paying a private seller for a vehicle or equipment.
• Providing a retainer to a law firm or an accountant.
• Paying government or court fees when cards are not accepted.
• Reimbursing a party in a settlement when they want guaranteed funds.

You do not “fill out” a bank draft or money order the way you fill a form at home. You request it from a teller or authorized clerk. They print it with the payee, amount, date, and security features. You may enter limited information yourself, like your address or a memo on a money order. Accuracy matters at the counter. Once printed, you cannot alter key fields.

The instrument itself has important parts

• The issuing institution’s name and routing details.
• A unique serial or draft number.
• The payee’s full legal name.
• The amount in numbers and in words.
• The issue date and location.
• Security features like watermarks and microprint.
• A purchaser or remitter line, depending on the issuer.

You also receive a receipt or stub. Keep it. You will need the serial number if the instrument is lost or stolen.

When Would You Use a Bank Drafts and Money Orders?

Use a bank draft when you need to pay a larger amount and the recipient needs guaranteed funds. A common example is a real estate deposit in Alberta. Brokerages and lawyers often request bank drafts for trust deposits. A bank draft is also a good choice when buying a vehicle from a private seller. The seller wants certainty and may not accept an e-transfer with limits. For professional retainers over typical e-transfer limits, a bank draft is practical.

Use a money order when the amount is smaller and you need a simple, prepaid instrument. Tenants often use money orders for rent and deposits. Some landlords prefer them to cash or personal cheques. Individuals also use money orders to pay government fees when online or card options are not available. If you do not have a bank account, a money order lets you make secure payments in person for a small fee.

Small businesses use drafts to pay suppliers who will not ship goods until they see guaranteed funds. They also use them to refund customers when a cheque is not appropriate. Solo and small firms use drafts to transfer settlement funds, pay disbursements, or post retainers with other professionals.

You would also use a draft or money order when timing and cut-off times matter. If a wire cannot be sent in time, a draft picked up at the branch can meet a same-day deposit deadline. When cross-border wires are slow or expensive, a foreign-currency bank draft can be a workable alternative.

Renters, landlords, business owners, executors, attorneys under a power of attorney, and students all use these instruments. Renters pay deposits and monthly rent. Landlords prefer guaranteed funds to avoid non-sufficient funds risk. Business owners pay large invoices. Executors distribute estate funds where recipients want certainty. Attorneys-in-fact manage payments on behalf of donors. Students use money orders for tuition deposits or housing when they lack Canadian banking history.

Choose a bank draft if the amount is high, the timeline is firm, or the recipient demands the strongest assurance. Choose a money order if the amount is modest, you need to pay in person, or the recipient prefers a simple prepaid document.

Legal Characteristics of the Bank Drafts and Money Orders

A bank draft and a money order are legally binding payment instruments. They are forms of negotiable instruments under Canadian law. The issuing institution creates a written order to pay the named payee a fixed sum. Because the funds are prepaid and set aside, the instrument represents guaranteed funds from that issuer.

What ensures enforceability?

The issuer’s promise to pay the named amount to the named payee. The instrument identifies the issuer, the payee, and the amount with certainty. It bears the required signatures or authentication from the issuer. It includes security features that confirm it is genuine. When presented for deposit, the collecting bank processes the instrument through established clearing systems. The issuer is then obliged to honour it.

A key fact: the legal guarantee comes from the issuer, not from you as the purchaser. With a bank draft, the bank owes the money to the payee. With a money order, the issuer owes the money to the payee. The funds are no longer yours once the instrument is issued. This is why cancellation rules are strict. The issuer may only agree to replace or refund a lost instrument after careful checks, an indemnity, and a waiting period.

Are these instruments risk-free?

No. Counterfeits exist. A bank can reverse a deposit if the instrument turns out to be counterfeit, even after initial credit. Recipients should verify high-value drafts directly with the issuing branch using trusted contact details. You should never rely on funds from a draft until the deposit hold is fully released. Holds are common for large deposits. Banks use them to reduce fraud and ensure final settlement.

Holds and availability rules apply in Canada. The recipient’s bank may place a hold for several business days, depending on the amount, account history, and risk. The deposit receipt does not mean the funds are “good.” Finality comes when the hold expires and the issuer has honoured the item.

Can an issuer “stop payment”?

Once a genuine bank draft or money order is issued, the issuer’s obligation is strong. If you lose the instrument, the issuer may replace or refund after you complete a lost-instrument declaration and an indemnity. There is often a waiting period to ensure the original is not presented. If you recover the original, bring it back to the issuer. The issuer needs the original to cancel it safely.

Payee naming matters legally. A draft or money order payable to a named person is not bearer paper. Only that payee (or their endorsee) can negotiate it. Leaving the payee blank creates risk. Do not do that. Ask the issuer to print “Pay to the order of [full name].” For more control, you may ask for a “payee only” or “non-transferable” restriction if the issuer offers it. This reduces the risk of someone endorsing it over without your consent.

Alterations void enforceability. If someone alters the payee name, amount, or date, banks will likely refuse it. Any corrections must be done by the issuer at the counter. Use a fresh instrument instead of crossing out errors.

Keep the receipt and serial number. This proof lets the issuer trace the item. It also supports your request if the instrument is lost or stolen. Without the serial number, replacement is slower.

How to Fill Out a Bank Drafts and Money Orders

You do not fill all fields yourself. You instruct the issuer and confirm details before they print. Here is the process to follow in Alberta.

1) Choose the right instrument.

• Use a bank draft for larger amounts or formal transactions.
• Use a money order for smaller, everyday payments or if unbanked.
• Confirm the recipient accepts your chosen instrument.

2) Gather recipient details.

• Legal name as it appears on their ID or business registration.
• If paying a business, get the exact legal entity name.
• Ask for a reference or invoice number for the memo line.

3) Confirm the amount and currency.

• Know the exact amount to the cent.
• Decide on Canadian dollars or a foreign currency.
• For foreign drafts, confirm fees and timing.

4) Visit the issuer with ID.

• For a bank draft, go to your bank or credit union.
• Bring valid government-issued photo ID.
• For a money order, visit your bank or authorized retail issuer.

5) Fund the purchase.

• For bank drafts, funds come from your account.
• Ensure the full amount and fees are available.
• For money orders, bring cash or use debit as allowed.

6) Provide payee information clearly.

• Give the exact payee name for printing.
• Avoid nicknames, initials alone, or abbreviations.
• If paying a sole proprietor, confirm whether to use the personal or trade name.

7) Review the printed instrument on the spot.

• Check the payee name for spelling and order.
• Confirm the amount in numbers and in words.
• Confirm the issue date and currency.
• Look for the issuer name and security features.

8) Add purchaser details where applicable.

• Some money orders ask for your name and address.
• Write in block letters, using permanent ink.
• Complete any remitter or sender line as instructed.

9) Use the memo or reference line wisely.

• Add invoice numbers, file numbers, or property addresses.
• Keep the note short and specific.
• Do not put sensitive personal data on the instrument.

10) Ask about restrictions to reduce risk.

• Where available, request “payee only” or “non-transferable.”
• Ask if the issuer can print “for deposit only to [payee].”
• Not all issuers offer these options, but it is worth asking.

11) Collect and keep the receipt and stub.

• The receipt shows the serial number and amount.
• Store it separately from the instrument.
• Photograph it for backup.

12) Plan delivery to the recipient.

• Deliver in person when possible.
• If you mail it, use a trackable service.
• Do not send it with other negotiable items in the same envelope.

13) Brief the recipient on deposit timing.

• Let them know it is a bank draft or a money order.
• Encourage prompt deposit to reduce loss risk.
• Remind them holds may apply.

14) Record-keep for your files.

• Note the date, payee, amount, and purpose.
• Save the invoice or agreement that supports the payment.
• Keep copies with the receipt.

15) If the instrument is lost or stolen, act fast.

• Contact the issuer immediately with the serial number.
• Ask for a trace and a hold, if possible.
• Complete a declaration of loss and indemnity as required.

16) Understand replacement timelines.

• Expect a waiting period before refund or reissue.
• Cooperate with the issuer’s verification steps.
• If you later find the original, return it to the issuer.

17) Avoid common errors.

• Do not leave the payee blank.
• Do not try to correct errors yourself.
• Do not endorse the back unless you are the payee.
• Do not hand over the draft until the transaction terms are final.

18) Coordinate with closing or payment deadlines.

• For real estate, confirm the deposit cut-off with the brokerage or lawyer.
• Buy the draft early on the due date to avoid lineups.
• If the deadline is tight, call ahead to confirm stock and staffing.

19) If you are the recipient, verify before releasing goods.

• For high-value items, call the issuing branch to confirm.
• Use contact details you look up yourself.
• Wait for the deposit hold to clear before delivering the asset.

20) Ask about fees and refunds.

• Confirm the purchase fee before you proceed.
• Ask about replacement fees for lost items.
• Know if the fee is refundable if you cancel the transaction.

Real-world examples

• You are paying a $15,000 real estate deposit in Alberta. Your brokerage asks for guaranteed funds. You visit your bank with ID. You request a bank draft payable to the brokerage’s trust account. You confirm the exact account name from your realtor’s instructions. The bank prints the draft. You check the payee, amount, and date. You take the receipt and serial number and deliver the draft the same day. The brokerage deposits it. A hold may apply. Your lawyer receives confirmation in time for conditions.
• You are a tenant paying a $1,800 rent and deposit. The landlord does not accept personal cheques. You buy two money orders for the exact amounts. You write your name and address where required. You put the unit number on the memo line. You keep the stubs and hand the money orders to the landlord at the walkthrough.
• You are paying a law firm retainer of $5,000. The firm requests a bank draft to open the file. You confirm the payee name is the law firm in trust. You bring the retainer letter to the bank to avoid errors. The teller prints the draft. You deliver it to reception and receive a trust receipt.

Practical tips for accuracy and security

• Use the recipient’s written instructions, not memory.
• Confirm entity names for businesses and trust accounts.
• Keep the instrument flat and clean. Avoid folding through the MICR line.
• Store it in a safe place until delivery.
• Never post photos of the instrument online.

Finally, remember that a bank draft or money order is as sensitive as cash. Treat it with care. If anything looks off, pause and ask the issuer to reprint. Small mistakes create big delays. Clear details at the counter save you time and stress later.

Legal Terms You Might Encounter

• Payee means the person or business you want to receive the funds. On the form, you write the full legal name of the payee. Make sure it matches the name on their bank account to avoid rejection or delays.
• Purchaser or Remitter means you, the person buying the bank draft or money order. Your name may appear on the form and the receipt. Use your legal name so the issuer can help you if issues arise.
• Drawer and Drawee identify who creates and who will pay the instrument. With a bank draft, the bank is the drawer and drawee because the bank issues and guarantees it. With a money order, the issuer is the drawer; a designated entity pays it. You do not list these on the form, but they appear on the instrument you receive.
• Negotiable instrument is a document that orders payment to a named party. Bank drafts and money orders are negotiable instruments. Your form entries—payee, amount, date—create a clear order to pay. Avoid any alterations that might affect negotiability.
• Certified funds refers to money the bank sets aside to guarantee payment. A bank draft is a form of certified funds. When you buy it, the bank withdraws or blocks the funds from your account. Your form triggers that guarantee, so you must be sure before you proceed.
• Endorsement is a signature on the back to transfer or deposit the instrument. As the purchaser, you usually do not endorse it. The payee endorses it when depositing or cashing. Make sure the payee name on the form matches the endorsement they will use.
• Stop payment means asking the issuer not to pay a presented instrument. With bank drafts, stop payments are rare and difficult because funds are guaranteed. With money orders, rules are stricter than for regular cheques. Your form and receipt details are needed to request a stop or replacement.
• Hold period is the time a bank delays access to deposited funds. Even certified funds can face a hold for risk control. Your payee might ask about the instrument type on your form to plan for holds.
• Stale-dated means too old to cash or deposit. Many drafts and money orders do not have a hard expiry, but institutions may refuse old items. Your form date matters; if you delay delivery, confirm whether the payee can still deposit it.
• Counterfeit means a fake or altered instrument. Banks check security features against fraud. Clear, accurate details on your form reduce red flags. Keep the instrument secure to prevent tampering.
• Declaration of loss and indemnity is a process to replace a lost draft or money order. You may need to sign a form promising to reimburse the issuer if the original turns up and gets paid. Your original purchase details on the receipt support this process.

FAQs

Do you need ID to buy a bank draft or money order?

Yes. You should bring government-issued photo ID. If paying from an account, you may also need your bank card. If paying cash or debit, the issuer may ask extra questions to verify your identity and prevent fraud.

Do you have to fill in the payee name, or can you leave it blank?

Do not leave it blank. A blank payee line can make the instrument payable to whoever holds it. That creates theft risk and may void protections. Write the full legal name of the intended payee on the form.

Can you correct a mistake on the form or the instrument?

Avoid corrections. Many issuers will reissue instead of accepting corrections. If you make an error on the form, ask the teller to void it and start a new one. If you discover an error after issuance, return to the issuer with your receipt immediately.

How long does it take for a bank draft or money order to clear?

It depends on the receiving bank’s risk checks. Many deposits appear the same or next business day, but holds can apply. Larger amounts, unfamiliar payees, or cross-border items may take longer. Tell your payee what type you will provide so they can plan.

Can you stop or cancel a bank draft or money order after purchase?

It is difficult for bank drafts because the funds are guaranteed. You can request a trace or a declaration of loss. Reissuance may require a waiting period. Money orders may allow cancellation if uncashed, but you need the serial number and receipt. Fees often apply.

Can you deposit a bank draft or money order by mobile deposit?

Some institutions allow mobile deposit for domestic items. Others require in-branch deposit due to fraud controls. If the payee will use mobile deposit, confirm that their institution accepts it and that security features scan clearly.

Do bank drafts or money orders expire?

They often do not have a fixed expiry, but “stale-dated” items can be refused. Issuers may also reduce the payable amount by fees after a long time. If you plan a delayed payment, ask the issuer about any time limits before you buy.

What if the draft or money order is lost, stolen, or damaged?

Report it to the issuer at once with the serial number and receipt. You may need to sign a declaration of loss and indemnity. Processing can take time to ensure the original has not been paid. If the item is damaged, ask the payee’s bank if they can accept it. If not, request a replacement.

Checklist: Before, During, and After the Bank Drafts and Money Orders

Before you sign or pay

• Confirm the exact payee legal name. Use registered names, not nicknames.
• Confirm the amount and currency. Plan for exchange rates if needed.
• Bring valid photo ID. Bring your bank card if paying from your account.
• Have your contact details ready: phone and email.
• Decide on delivery method: in person, courier, or mail with tracking.
• Ask about fees, daily limits, and any hold periods the payee may face.
• Note purpose or invoice number if you want it in the memo line.
• Verify the payee’s banking location for currency acceptance.
• Prepare the address for mailing, if you will mail it.
• Set a follow-up date with the payee to confirm receipt.

During signing and issuance

• Check that the payee name is spelled exactly right.
• Verify the amount in numbers and words match.
• Confirm the currency printed on the instrument.
• Check the date is today’s date and correct.
• Review any memo line for accuracy.
• Ensure there are no stray marks or corrections.
• Confirm security features appear present on the issued instrument.
• Get the receipt; make sure the serial number is readable.
• Write down any tracking or reference numbers the issuer provides.
• Store the instrument flat in a secure envelope before delivery.

After issuance and delivery

• Record the serial number, date, amount, and payee in your records.
• Share a copy or photo of the instrument details only if necessary. Redact sensitive data.
• If mailing, use secure, trackable delivery. Keep the tracking number.
• Tell the payee to deposit promptly and to contact you if a hold occurs.
• Monitor your account for the debit (if funds were withdrawn at purchase).
• File the receipt with your accounting documents.
• If a problem occurs, contact the issuer at once with your serial number.
• After payment clears, obtain written confirmation from the payee if needed.
• Store your records for your normal retention period.

Common Mistakes to Avoid

• Leaving the payee line blank or vague. Consequence: anyone holding the instrument may attempt to cash it. Don’t forget to use the exact legal name of the intended payee.
• Using nicknames or trade names that don’t match the bank account. Consequence: the payee’s bank may refuse the deposit. Confirm the registered business name or the full personal name before you buy.
• Making corrections, cross-outs, or overwriting amounts. Consequence: the issuer or the payee’s bank may treat it as altered and reject it. If you make a mistake, ask for a reissue.
• Failing to record the serial number and keep the receipt. Consequence: replacement takes longer and may be impossible without proof. Photograph or note the serial number and store the receipt safely.
• Mailing without tracking or protection. Consequence: loss, theft, or delays with no delivery proof. Use a secure method and keep tracking details until the payee confirms deposit.

What to Do After Filling Out the Form

1. Confirm issuance and collect your receipt. The receipt links you to the instrument. It is essential for any trace, cancellation request, or replacement. Check the serial number against the instrument before you leave.
2. Deliver the instrument securely. If you hand-deliver, meet in a safe, professional setting. If you mail, use trackable, secure delivery. Avoid leaving it in an unattended mailbox. Tell the payee when to expect it and provide the tracking number if needed.
3. Coordinate deposit timing with the payee. Let them know the type of instrument and the amount. Ask them to deposit promptly. If a hold occurs, they should tell you right away so you can support any verification the bank requests.
4. Update your records. Record the serial number, amount, payee, and date. Attach the receipt. For business payments, add the invoice number and ledger coding. This makes reconciliation straightforward at month-end.
5. If you need to change the payee or amount, do not edit the instrument. Return to the issuer with the receipt and request cancellation and reissuance. Expect fees and, in some cases, a waiting period while the issuer confirms the original has not been presented.
6. If the instrument is lost, stolen, or damaged, act quickly. Contact the issuer with the serial number and receipt. Ask about a declaration of loss and indemnity. Be prepared to wait while the issuer confirms it has not been paid. Keep all communication records.
7. Close the loop after payment. Ask the payee for confirmation once their bank releases funds. If the payment relates to a contract or invoice, request a paid receipt or statement showing a zero balance. File these with your records.
8. If you issue drafts or money orders regularly, refine your process. Use a standard checklist. Keep templates for payee names and memo formats. Track delivery times and common hold periods for your payees. These steps reduce errors and delays.