Difference Between Cheque And Demand Draft

Difference between cheque and demand draft

In conducting transactions and transferring money, the bank plays a crucial part in everyone’s life. You cannot undertake any money-related work nowadays if you do not have a bank account. Online payment options are both easy and hazardous. In this context, you will get to know about the difference between cheque and demand draft, so that it will be straightforward for you to use them. A check is a paper bundle that contains the account holder’s and the withdrawer’s information. Anyone can withdraw money from anyone’s bank account using a check. On the other hand, a demand draught is a collection of paper that also aids in the withdrawal of funds. But the main difference between cheque and demand draft is that cheque can bounce but the demand draft will not. The below images will give you an idea of the difference between cheque and demand draft and you can easily identify the cheque and the demand draft.

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Definition of cheque

You should know the definition of the cheque before going to the difference between cheque and demand draft, so that the basics will be clear to you. A check is a financial instrument that the account holder uses to send money to another person. Because there are fifty-fifty odds of receiving money after depositing the cheque, the cheque is not equivalent to the money. If the bank balance does not equal the amount of the cheque, it will be cancelled. Check cancellation is highly likely, however, you must exercise extreme caution while handing and receiving cheques. If you want to make a smooth transaction then you should learn the difference between cheque and demand draft.

Reasons which make a cheque negotiable instrument

The payee writes the cheque and exchanges it for cash. The negotiable points will be tied to the method of endorsement; if the check is not deposited in the bank within the specified time frame, it will be invalid. In general, the validity of the cheque is three months, and you must deposit it within three months after its issuance. You should be aware of the difference between cheque and demand draft before going to prefer anyone thing. If you don’t want to face the issues or delayed payment then a demand draft is the right pick for you as it is the major difference between cheque and demand draft.

If you also want to use a cheque to make payments then you should visit the bank and apply for the checkbook. This is not a kind of difference between cheque and demand draft as you have to visit the bank to get both, the checkbook and the demand draft.

Definition of demand draft

Demand draughts are commonly used to transfer funds from one state bank account to another. The benefit of the demand draught is that you do not have to be a bank account holder to apply for it; anybody may apply for it. Demand draught is one of the safest ways to move money from one bank account to another branch bank account; the bank acts as a guarantor for the transfer of funds. The demand draft is a prepaid method and it is the top difference between cheque and demand draft.

Characteristics of the cheque before going to the difference between cheque and demand draft:

• The validity of the demand draft is for 3 months only but you can revalidate it by an application to the bank.
• You can pay the demand draft at any branch of any bank. But the point you have to keep in mind is that it requires a fee. You can pay the fee in cash or by cheque.
• Demand draft is issued and received by any bank, it is convenient for every user.
• The other point of the demand draft is that it can never be dishonored because it is a prepaid instrument.
• The demand draft is only valid with the signature of the branch manager.

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difference between cheque and demand draft

1. A check is a type of negotiable financial instrument that instructs the bank to pay a certain quantity to the individual named on the cheque. A demand draught is a type of prepaid instrument issued by a bank to a specific person or business for the purpose of transferring money from one location to another.
2. When the issuer issues a check, the drawer must go to the bank to obtain the funds. However, a demand draught is an instrument that moves money from one city bank to another.
3. The payment is given to the individual whose name appears on the cheque. The demand draught, on the other hand, is issued to the person or business listed on the demand draught bank information. A demand draught is a bank-to-bank trader, whereas a cheque is a bank-to-person transfer.
4. The bank or the drawer are not charged for the cheque. The demand draught, on the other hand, levies a fee in the form of cash or cheque. If you want payment security, you must comply with the requirement and pay the bank’s fee.
5. The signature of the issuer on a check is highly significant, whether it is an individual or the authorized signatory by the company. While the demand draught must bear the authorized officer’s seal and signature, as well as the bank’s rubber stamp.
6. The cheque involves three people in the entire procedure, but the demand draught involves just two. Demand draught, according to studies, is incredibly handy for consumers since it takes very little time.
7. The cheque might be dishonored for a variety of reasons, including insufficient cash, a different signature format, or other comparable causes. The demand draught, on the other hand, has no risk of being dishonored because it is paid in advance by the bank.

source: https://www.valuepenguin.com/banking/statistics-and-trends

To get the advantage of the fast payment you should learn about the difference between cheque and demand draft. You will get different content on the internet regarding the difference between cheque and demand draft, make sure you are going with the right and trustworthy website.

Contents of the cheque along with the difference between cheque and demand draft:

1. MICR Code of the bank
2. Unique cheque number
3. Signature of the issuer
4. The amount, both in words and digits
5. Type of account
6. Account number of the issuer
7. Name of the beneficiary
8. Date of issue
9. Issuer name
10. Drawee bank and branch name

Content of demand draft along with the difference between cheque and demand draft:

1. Signature of the authorized signatory and branch manager
2. The amount payable in words and digits
3. DD number
4. MICR code of the bank
5. Recipient name in whose favor the DD is prepared
6. Issuing bank and branch name
7. Issuing date

The different types of cheques you should know is the difference between cheque and demand draft:

1. Bearer cheque
2. Order cheque
3. Crossed cheque
4. Uncrossed cheque
5. Post-dated cheque
6. Stale cheque
7. Traveler cheque
8. Gift cheque
9. Mutilated cheque
10. Blank cheque

Types of demand draft you should know the difference between cheque and demand draft:

1. Sight demand draft
2. Time demand draft

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What are the reasons to get a cheque dishonored by the bank?

These are a few points that can be a reason to get a cheque dishonored:

• Insufficient funds in the bank account.
• Frozen account
• In case of a stale cheque, if the cheque is deposited after the validity time period.
• Because of frequent alterations, corrections are done on the cheque.
• No matching signature of the issuer.

Conclusion:

Banking transactions are increasingly popular these days since they function as middlemen in the movement of funds from one bank account to another. However, make certain that you thoroughly fill out the cheque and the demand drat. The issuer should use a nice pen and write in a legible script. If you are performing the operation for the first time, you might seek assistance from a bank executive. You should be cautious while entering the bank account number since an incorrect digit might cause the money to be transferred to another random individual. Now all the difference between cheque and demand draft is very clear to you after reading the above content. You will get to find a lot of points in difference between cheque and demand draft when you get to use both the cheque and the demand draft. If you still have any kind of query or doubt regarding difference between cheque and demand draft, then you can put it in the comment section below.

FAQs:

Q. Is it possible to cancel a demand draft?

Ans. Yes, you can cancel a demand draft at any time.

Q. What is the charge of issuing a demand draft?

Ans. The charges of demand draft and not uniform and you have to confirm it with the bank.

Q. Can the demand draft be dishonored like a cheque?

Ans. No, a demand draft can not be dishonored.

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