Interest-Bearing Drafts

Summary of Interest-Bearing Drafts

A draft or bill of exchange containing a clause requiring the drawee to pay interest at a prescribed rate from the date the instrument was drawn until settlement at maturity. A common form of the clause reads: “With interest added thereto at percent per annum from

the date hereof to the approximate due date of remittance in “For many years, the interest clause was used largely in conjunction with exports to Africa and Asia, and so came to be known as the colonial clause.

(Main Author: William J. Miller)