8 Difference between Cheque and Demand Draft

Cheque and demand draft are the two instruments which are used for the payments. Both the modes are used for payments but have different parameters. Cheque is like a formatted paper which contains an order to the bank to make payment to the person mentioned in the cheque. Demand draft is also a mode of transfer from one bank branch to another same bank branch in another City. Demand draft is formed after the deposit of payment in the bank.

These days banks are very important in our daily life. Every day millions of transactions are done with the banks. These dates online payment is very famous which are only possible with the help of banks. We make payments with many methods which a are provided by the banks. The most important is bank account, bank accounts have many types. Banks offers credit and debit cards which are very helpful these days. Banks are very important for the investments. Cheque and demand draft facilities also provided by the banks.

There are many differences between cheque and demand draft. Before knowing the difference between cheque and demand draft. We should have completed knowledge about the cheque and demand draft. In this article we will discuss the definition of cheque and demand draft and differences between cheque and demand draft.

Cheque vs demand draft

Sr. No	Cheque	Demand Draft
1	A cheque is an order to the bank to pay payment to the drawee.	Demand draft is used to transfer money from one bank branch to the same bank branch in another city.
2	Payment is made after submitting the cheque to the bank.	Demand draft is given after depositing the full payment.
3	Bank doesn’t charge for the cheque.	Charges are applied for demand draft
4	Cheque is issued by the account holder to the bank.	Demand draft issued one bank branch to the same bank branch in another city.
5	Cheque is signed by the drawer.	Demand draft is signed and sealed by the bank branch manager.
6	In cheque three parties are involved.	Two parties are involved
7	May be canceled.	Wasn’t canceled Normally.
8	Drawer and payee are different.	Both parties are banks.

Cheque

Cheque is a mode of transfer payment from one person to another person. Cheque is like a formatted paper which includes bank name, branch name and account details all these details are preprinted on cheque. Drawer mentions the name of the payee on the cheque with the total amount in numbers and words. After the filling is cheque properly the drawer signs the cheque. This sign should be the same as the sign present in the bank. If this sign doesn’t match with the bank sign, the cheque will be canceled.

Cheque is available in cheque books which are issued by the banks. For a cheque book, a person should have a bank account in the bank. There are three parties in cheque payment mode.

Drawer

Person who issues a cheque.

Drawee

The party which directed payment. The bank from which the cheque is drawn is known as a drawer.

Payee

Person whom the payment is payable.

Reasons for cancellation

1. Mismatch sign of bank and cheque.
2. Insufficient balance in bank account.
3. Cheque is older than 3 months.
4. Correction and overwriting.
5. Closed account.
6. When payment is stopped by drawer

Demand draft

Demand draft is another mode of payment which is provided by the banks. Firstly we have to deposit the amount of the demand draft. After the payment banks issue the demand draft. Demand draft is used when the person has a security issue or to send money to an unknown person. In that case demand draft is used. Most business transactions are done with the help of demand draft because there is risk of credit risk. So in this type of cases demand draft is used because transfer of money is guaranteed.

For example

if you want to sell a flat on registration, the client hands over a cheque to you and if the cheque is bounced and it is impossible to get back registered property the same things happens in other business deals. In such cases demand draft is suitable because all the money is deposited in advance. The main difference between cheque and demand draft is that payment is 100% successful in demand draft.

Main difference between cheque and demand draft.

1. A cheque is an order to the bank to pay payment to the drawee. While demand draft is used to transfer money from one bank branch to the same bank branch in another city.
2. By cheque payment is made after submitting the cheque to the bank. While demand draft is given after depositing the full payment.
3. Bank doesn’t charge for the cheque. Charges are applied for demand draft
4. Cheque is issued by the account holder to the bank. While in demand draft issued one bank branch to the same bank branch in another city.
5. Cheque is signed by the drawer. While the demand draft is signed and sealed by the bank branch manager.
6. In cheque three parties are involved. In demand draft two parties are involved
7. Cheque may be canceled. But the demand draft wasn’t canceled.
8. The cheque drawer and payee are different. While in demand draft both parties are banks.

Conclusion

Both cheque and demand draft are two different modes of the transaction. Both have advantages and disadvantages of the cheque and demand draft. Cheque is an easy process of transaction. And when there is insecurity of the transfer in that case demand draft is used. Mostly demand draft is used to transfer money to government departments.

This is all about the difference between cheque and demand draft. We hope this article will be helpful for you. If you have any doubts please feel free to comment on us. To read about such a difference please go through our website.