What is called a check drawn by one bank on another bank where it maintains funds?

A check drawn by one bank on another bank, where it holds funds, is classified as a bank draft. This instrument represents a direct order for payment from one bank to another and is guaranteed by the bank that issues it, which reduces the risk of bounced checks.

In the context of the transaction, a bank draft is advantageous for its reliability and security, as it ensures that the funds are available since the issuing bank backs it. Customers often utilize bank drafts for high-value transactions, where the assurance of funds is critical.

While the other options present alternative types of payment instruments, they differ significantly in their characteristics and usage. Certified checks involve a personal check that the bank guarantees and certifies, ensuring there are sufficient funds in the account. Money orders are pre-paid and can be used similarly to a check but are often used for smaller transactions and do not necessarily involve a bank. Traveler's checks are designed for travelers to use in place of cash but are not drawn on the funds of one bank from another. Each of these alternatives serves a different purpose in financial transactions, highlighting the specific function of a bank draft in direct interbank dealings.