Have you ever felt unsure about which payment method to use when sending money in Canada or abroad? For newcomers or anyone unfamiliar with the Canadian financial system, choosing a money order or a bank draft can be confusing. Both are secure payment options, ideal whether you’re covering rent, putting down a deposit, or making a large purchase.
Knowing the difference between money orders and bank drafts can save you time, cash, and potential processing hassles. That’s why we at Remitly have created this guide to break down both alternatives in simple terms. You’ll learn what each method entails, how they work, and which one might be the best fit for you.
What is a money order?
A money order is a prepaid payment certificate that works much like a cheque, but is guaranteed by the issuer. This means once you buy a money order, the desired amount is already paid, so a recipient doesn’t have to worry about it bouncing due to insufficient funds.
How it works
It’s a reliable option for transactions between people who may not know each other well. For example, say you’ve just moved to a new city in Canada and need to pay your first month’s rent to a landlord you haven’t met yet. A money order is a safe, traceable way to make that payment.
In Canada, most providers set a purchase limit of $999.99 CAD per money order. If you need to send more than that, you can simply buy multiple money orders to cover the full amount.
Where to get a money order
To get a money order, visit an authorized provider and pay the full amount upfront, plus a small service fee. Authorized vendors include:
- Canada Post, the national postal service in charge of delivering mail and parcels
- Financial institutions, such as Canadian banks and credit unions
- Money transfer services
- Retailers like convenience and grocery stores, or cheque-cashing businesses
Once you buy the money order, you’ll receive a printed document made out to a specific person or business. It relies on guaranteed funds, providing extra security for both the sender and the recipient.
What is a bank draft?
On the other hand, a bank draft is a type of cheque that’s issued and guaranteed by your bank or credit union. Unlike a regular cheque, it’s drawn directly from the bank’s own funds, not your personal account. This ensures every payment is secure and guaranteed.
How it works
When you request a bank draft, your financial institution immediately withdraws the full amount from your account and holds it in a reserve. The bank then issues a printed draft made out to a specific person or business, which can be safely deposited or cashed by the recipient.
Bank drafts are commonly used for large transactions like buying a car, paying a security deposit, or making a down payment on a home. They also provide a clear paper trail, which makes them useful for record-keeping or as proof of payment.
How to get a money order
Once you decide to obtain a bank draft, you can request one in several ways:
- Visit your bank branch or credit union in person
- Log in to your account online and follow the steps provided
In Canada, there’s generally no upper limit on the amount you can request for each bank draft. However, the issuer may have its own policies or limits depending on your account type, as well as its own fees.
Bank draft vs money orders: key differences
When choosing between a money order and a bank draft, be sure to consider the following key factors:
Cost
Money orders are usually the more affordable option for smaller payments. Fees vary depending on where you buy yours, but they typically range from $4–$10 USD.
On the other hand, bank drafts tend to cost between $7 and $15 CAD, and fees usually stay the same no matter how much you’re sending. This means that for larger payments, the price difference between the two options becomes less noticeable.
Availability and convenience
When it comes to availability and convenience, money orders have the edge. You can purchase money orders at your local bank, post office, and even some grocery stores like Walmart or 7-Eleven.
But bank drafts are available only through banks and credit unions, and you’ll have to visit during business hours to get one. While money orders are issued instantly, bank drafts take a few minutes to process because the bank needs to verify and withdraw the funds first.
Credibility
Beyond cost and convenience, another major difference is how users view and trust each of these payment methods in Canada.
- Bank drafts are viewed as more formal and are often requested for real estate deals, university payments, or official contracts.
- Money orders, while widely accepted for everyday transactions, may sometimes require extra verification, especially for larger or international payments.
Refund and replacement process
If a money order or bank draft is lost or stolen, you can replace both, but the process works a little differently. Money orders are usually easier to trace and refund through the issuer, often taking just a few weeks, depending on the provider.
However, bank drafts require the bank to confirm that the draft hasn’t been cashed before issuing a replacement. This verification process can take longer, but it adds an extra layer of protection against fraud or duplicate payments.
Fraud prevention measures
Both options include security features to prevent forgery and tampering.
However, bank drafts have the advantage as they typically feature watermarks, holograms, microprinting, and unique serial numbers. These features make them extremely difficult to counterfeit.
Money orders are also secure, but can be more vulnerable if purchased from unverified sellers.
Processing time and fund clearance
Another key difference lies in how quickly each payment type clears after being issued or deposited.
- Money orders are typically available for immediate cashing or deposit, though banks may hold them briefly for verification.
- Bank drafts can take slightly longer to clear because the bank confirms their authenticity and funding before releasing the money.
When to choose each option
Before exploring how you can use money orders and bank drafts safely, let’s look at when each option makes the most sense:
Choose a money order when:
- The recipient accepts money orders: Some businesses or individuals may specifically ask for them because, unlike cheques, they can’t bounce. Be sure to confirm with recipients beforehand to avoid delays or rejected payments.
- You don’t have a bank account or prefer not to use it: You can buy a money order without linking it to your bank account. This flexibility is ideal for newcomers or anyone who wants control over payment methods.
- You value privacy: Money orders let you make payments without sharing your personal banking information, offering a more discreet way to pay. They’re also easy to track, so you get both security and peace of mind.
Choose a bank draft when:
- The recipient requests a bank draft: Some businesses and individuals only accept bank drafts because of their guaranteed funds. Using a draft in these situations ensures your payment is received without issue.
- You need to transfer funds without using personal cheques: Bank drafts let you pay recipients without revealing your personal account details. They act as a trusted intermediary, ensuring both sender and recipient can complete the transaction in confidence.
- You’re paying insurance premiums in a lump sum: Many insurance providers ask for bank drafts for premium payments to confirm immediate coverage. Using this method means your payment is accepted right away, ensuring your policy isn’t voided.
Tips for using money orders and bank drafts safely
Money orders and bank drafts are secure payment options, but a few simple precautions can help protect your funds and prevent any complications.
Fill out payment details carefully and keep receipts
Ensure the date, recipient’s name, and amount are written correctly. Even small mistakes can delay or invalidate the payment. Double-check spellings and numerical amounts before submitting, and store receipts as proof of purchase to make it easier to claim your funds if something goes wrong.
Keep tracking information and confirmation numbers
Maintain a record of any serial numbers, tracking details, or confirmation slips linked to your payment. This documentation is crucial if you need to follow up with the issuer, report a loss, or confirm delivery. Store digital copies securely, such as in a password-protected folder, for easy access.
Don’t send payment instruments to unknown recipients
Use money orders or bank drafts only for trusted individuals and verified businesses. Once these instruments are delivered, they’re hard to reverse, so sending them to strangers increases the risk of scams or lost funds. If you have to transact with someone new, confirm their identity through multiple channels, such as phone, email, or official business records.
Watch out for fraud schemes involving fake payment requests
Scammers sometimes ask for money orders or bank drafts while pretending to be legitimate companies or individuals. Be cautious with unsolicited requests and always verify the sender’s identity before making any payment. Research unfamiliar companies online, check reviews, and confirm official registrations before sending money.
Choosing the right payment method for your needs
Both money orders and bank drafts offer immigrants and native Canadians a safe, dependable way to make payments. The best alternative for you depends on factors like the amount you’re sending, convenience, what the recipient requires, and so much more.
No matter your choice, these payment methods make handling domestic transactions simple while providing secure options for sending money internationally. By understanding their unique features, you can ensure your transactions go smoothly, securely, and are accepted without issues, helping to secure your financial future in Canada.
FAQs
Which is cheaper: money order or bank draft?
Money orders are usually more affordable for smaller payments, costing around $5 to $10 CAD for each. Bank drafts tend to be a bit pricier, often ranging from $7 to $15 CAD, but their cost is generally consistent regardless of the amount. For larger payments, the difference is minimal, making bank drafts a practical choice for high-value transactions.
Where can I get money orders vs bank drafts in Canada?
You can buy money orders at Canada Post offices, banks, credit unions, and some retail stores like Walmart or 7-Eleven. However, bank drafts are only available through banks and credit unions, and you’ll usually need an account to request one.
How long does it take for a money order or bank draft to clear?
Money orders are prepaid, so they typically clear immediately, making them ideal for quick, low-value payments. On the other hand, bank drafts ensure guaranteed funds, but the recipient bank may take several business days to process them.
Can I cancel or stop a money order or bank draft?
Yes, but cancelling both money orders and bank drafts involves submitting a claim through the issuer. Bank drafts can take longer to cancel because the funds have already been withdrawn from your account. However, money orders are usually easier to cancel, especially if you act quickly before delivery.
Do I need identification to purchase a money order or bank draft?
Yes, most issuers will ask for a valid photo ID before issuing a money order or bank draft, especially for larger amounts. This helps keep the transaction secure and easy to track, reducing the risk of fraud.