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Money Order vs. Bank Draft: What’s the Difference?

Money Order vs. Bank Draft: What’s the Difference?

Money orders and bank drafts have been around for a long time, but not everyone understands the differences between the two. I recently published a blog post on how money orders work in Canada. This article compares money orders and bank drafts to help you know when to buy either one.

What Is a Bank Draft?

Bank drafts are paper-based payment instruments guaranteed by their issuer, usually a bank or credit union. When you purchase a bank draft, the funds are removed from your account and secured by the bank in an internal account, ensuring that the funds will be available when the payee negotiates the bank draft.

Unlike money orders, which are for small amounts, bank drafts are often used for large transactions, i.e., real estate purchases, estate settlements, etc., where cash is not an option, and regular cheques are not secure enough.

Bank drafts must be dated for the day they are purchased (post-dating is not permitted), issued to a specific payee, and paid for upfront. Most bank drafts contain several security features as a fraud protection measure.

These days, many banks only issue bank drafts. Years ago, they used money orders for small amounts and bank drafts for more significant transactions. To buy a bank draft, you will need an active account and bank account number with the issuer.

What Is a Money Order?

Like the bank draft, money orders are physical payment instruments that the issuer guarantees. Money orders are available for purchase from various financial institutions in Canada, including Western Union and MoneyMart. One of the most well-known is the Canada Post Money Order.

Money Orders are often only available for up to $1000, although there are exceptions. Unlike bank drafts, you can sometimes purchase a blank money order and then make it out to a specific payee later.

Money Order Pricing

Money orders are cheaper than bank drafts. Where a financial institution offers both products, money orders will always be more affordable. Canada Post charges $7.50 per money order. Generally, money orders range between $2 and $7.

Bank Draft Pricing

Bank draft fees are higher than money order fees – approximately $10 at any of Canada’s big banks. Credit Unions tend to charge less for bank drafts – the average cost is between $5 and $7. Many financial institutions include free bank drafts with their most comprehensive bank account service plans.

Bank Draft Pros and Cons

There are times when a bank draft is your best bet, but there are also some drawbacks you should be aware of.


  • Funds are guaranteed
  • You can easily convert them to cash
  • Ideal for large dollar amounts
  • Widely accepted
  • You can purchase them in several currencies


  • Expensive (especially if you need more than one)
  • You cannot transfer the funds electronically.
  • Drafts cannot be post-dated
  • Must have a specific payee

Money Order Pros and Cons

Money orders are affordable and convenient. But they aren’t always the best option when you want to send someone money. For example, e-Transfers are often more affordable and convenient.


  • Affordable
  • Widely available, i.e., banks, credit unions, post office
  • Guaranteed funds
  • A secure form of payment
  • Easily converted to cash
  • You don’t need a bank account to purchase (post office)


  • Lack the convenience of Interac e-Transfers
  • Money order scams are common.
  • It can be difficult to track compared to a bank draft or regular cheque

Can You Get Scammed on a Money Order or Bank Draft?

Many people believe that their bank won’t have to exercise due diligence when cashing a money order or draft because the funds are guaranteed. While that may have been the case, the prevalence of money order scams means that financial institutions must be on high alert anytime they are negotiated.

Many well-meaning bank customers fall victim to fraud and attempt to negotiate fraudulent bank drafts and money orders they believe are legitimate. Fraud can take the form of romance scams, mystery shopper scams, Kijiji scams, and more.

As a result, your bank may decide to place a hold on funds when you deposit a bank draft or money order. If you require immediate access to the funds, check with your bank beforehand to determine whether a hold will be required.

Bank Drafts vs. Money Orders: Summary

While electronic transfers have become the default way to send money, bank drafts and money orders continue to serve a valuable purpose. Bank drafts are ideal for sending large sums, and money orders are perfect for sending money in the mail to friends or family when you don’t want to risk losing cash. Keep the costs in mind, and the possibility of fraud, if you’re receiving a bank draft or money order from a stranger.

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