We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is a Foreign Draft?

Malcolm Tatum
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A foreign draft is a type of bank draft that can serve as the means of tendering payments in something other than domestic currency. With this particular approach, the draft is denominated in a specified currency and presented for payment in much the same fashion as any type of check or other draft instrument. The receiving bank will convert the currency based on the current rate of exchange and complete the deposit. This approach is often used by businesses that operate in a number of nations, allowing clients in those countries to pay for services rendered using their own national currencies.

With a foreign draft, the transaction is initiated by choosing the currency to be used and using a financial institution that is based in the nation associated with that currency. Typically, the individual or firm initiating the draft will pay some sort of fee for the service, with the amount of the fee based on the type of account that is held with that particular banking operation. Once the draft is prepared, it can then be forwarded electronically to the recipient. That recipient can then forward the draft to his or her bank, where is it converted into the currency in common use in that nation and deposited into the customer account. Typically, the rate of exchange as of the date of the issue of the foreign draft is used for the currency conversion.

There are several benefits to using a foreign draft. For customers, this process avoids the necessity of incurring the time and expense of making the currency conversion at that end of the transaction. The draft is prepared in local currency and IS then forwarded to the institution specified by the client, usually using details such as the routing transfer number and the account number of the recipient. This approach is not only safer than mailing a paper check, but also allows the funds to be received and posted to the client account much faster, which in turn can mean avoiding interest or other fees that could accrue on that account if the payment was received after the due date.

Providers also benefit from accepting a foreign draft from an international customer. This approach helps to ensure the turnaround between sending the invoice and receiving payment is kept to a minimum. As a result, cash flow is faster and there is less of a possibility of the accounts receivables to have a larger number of invoices that remain open past the 30-day mark. While there are usually some charges for both issuing the foreign draft and for processing it on the other end, the faster processing of the payment usually offset the costs incurred by both the sender and the recipient.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By Nannyg22 — On Apr 10, 2012

How can I tell if a bank draft is legitimate?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.