Bank Drafts

Written by Laurie Nichol
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Bank drafts are excellent solutions for EFT processing in many cases. The advent of easier and more efficient ACH transactions has challenged the large role that bank drafts used to play, but both are still viable options. Using bank drafts has always been a good way to expedite your payment receiving processes.

Bank drafts are paper agreements for monetary transfer, just like traditional paper checks. However, these are created by the person or business who is receiving the money, instead of by the person who is the payer. And, instead of being signed by this payer, they are stamped with a generic statement that the payer's signature has been recorded elsewhere.

Because the payer's signature is not found on bank drafts, there are higher incidences of fraud associated with them. Therefore, there is greater scrutiny of these documents by the financial institutions that deal with them. For this reason, using bank drafts instead of ACH processing systems can be more costly.

When Do You Choose Bank Drafts Over ACH Processing?

Those businesses which have a low volume of transactions are best advised to use bank drafts as their processing solution, since this type of payment occurs more quickly. Also, there are specific types of businesses for which ACH usage is prohibited by law. Companies with a high volume of sales and those which are comprised of outbound call centers are among those on the list.

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