What is Difference between cheque and Demand Draft

Cheque is a negotiable instrument, contains an order to the bank, signed by the drawer, to pay a certain sum of money to a specified person or account or bank or any specified industry. And Demand Draft is a negotiable instrument used for the transfer of money from one place to another payment payable either to order or to bearer. It is similar to a bill of exchange.  We shall discuss differences between Cheque and Demand Draft which will assist anyone to choose one of them.

Is cheque required for Demand Draft (DD)?

The Demand Draft can be made by paying the Bank in Cash, but for Demand Drafts exceeding Rs. 50,000 the payment should be by cheque only. Quoting your PAN No. is also necessary in case the value of the Demand Draft is more than Rs. 50,000/-. A Draft is generally prepared in the Indian Currency i.e. Rupees.

speciman of demand draft
A sample copy of Demand Draft

Is Demand Draft safe than Cheque?

Yes, always. A demand draft can’t be dishonored as the money is already paid to the bank, but in the case of a cheque, it can bounce due to instructions to stop payment by the drawer or due to insufficient balance in the drawer account. While the bank issues a demand draft and a cheque is issued by the customer of the bank.

Why did the Demand Draft use?

Demand Draft used for safety from being bounced like a cheque. Mainly it’s used for payment outside of the city.

What happens if Demand Draft is not used?

If the demand draft has expired and has not been enchased by the payee, the amount is not automatically credited back into the drawer account. The bank will re-validate the draft for 3 months. You can cancel with the process mentioned above, or you can use the Demand Draft again to transfer funds.

How many days Demand Draft and a Cheque is valid?

Demand Draft valid for 3 months from date of issue but if it has not withdrawal by the payee, bank will re-validate it for next 3 months. A cheque is valid for 3 months from the issued date, but if it has not paid to the payee between the valid periods, it will be refused by the bank.

Can I do RTGS without Cheque or Demand Draft?

RTGS have no amount cap. The system is available on all days when most bank branches are functioning, also on Saturdays. This method is realtime transfer of funds to the beneficiary account. The remitter need not use a cheque or a demand draft.

Can I deposit Demand Draft to any branch?

Demand Draft issued from one branch can be liquidated by any branch – rather has to be paid by any branch without charges as per RBI guidelines.

Difference between Cheque and Demand Draft

  1. Payment of a cheque can be stopped by the drawer, but payment can’t be stopped in DD.
  2. A cheque can be paid to bearer or order. But DD is paid to a person on order.
  3. In cheque drawer and payee are different persons. In DD, both parties are banks.
  4. A cheque needs signature to transfer amount, While DD does not require signature to transfer funds.

Types of Cheque:

Cheques are generally seen as a more secure way of transferring money. Cheque features include the date, the payee line, and the amount of the cheque, the payee’s endorsement, and a memo line, signature of drawer. Types of cheques are – Open cheques, Self cheque, Post Dated Cheque, Banker’s Cheque, Traveler’s Cheque. Crossed Cheque and account payee cheque.

sample cheque
Sample Copy of Cheque

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Types of Demand Draft:

Demand Draft is two types, namely –

  • Sight Demand Draft 
  • Time Demand Draft

But nowadays Cheques and demand drafts are losing their place as instruments that are used for payments. This is because; most individuals are today making payments through the RTGS and NEFT. These methods are faster than the traditional methods and there is also no worry of dishonor of a cheque. Stay tuned with BLOG ROCKS.