In this article, we’re explaining the difference between cheque and demand draft.
This article is one in a series of free articles focusing on international banking and related services for Non-Resident Indians (NRI).
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Difference Between Cheque and Demand Draft
- Advantages of Demand Drafts
- What Are Demand Drafts Used For?
- Frequently Asked Questions
- Ready to Explore Your Options?
Difference Between Cheque and Demand Draft
The main difference between a cheque and a demand draft is that a cheque can be cancelled or can bounce due to insufficient funds while a demand draft is a form of guaranteed payment from a financial institution. In other words, cheques are issued by individuals and are subject to change, while demand drafts are confirmed payments from a bank that cannot be altered.
Advantages of Demand Drafts
The primary advantage of demand drafts is that they are a guaranteed form of payment from a financial institution. In other words, demand drafts cannot be cancelled and they cannot “bounce” since the funds have already been committed to the payment.
For these reasons, demand drafts are typically seen as a more secure, less risky form of payment than standard cheques that can be issued by individuals, which are subject to cancellation or insufficient funds in the issuing account.
What Are Demand Drafts Used For?
Demand drafts are typically used for larger payments that require a more secure form of payment than a personal cheque. Additionally, it’s common for many businesses to have policies against accepting personal cheques. This may require payment to be provided by a bank draft instead.
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Frequently Asked Questions
Below are three of the most common questions that we receive from people asking the difference between a cheque and a demand draft. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
Which Is Better DD or Cheque?
To decide which option is better, you first need to consider the costs and the payment being made. For example, while demand drafts are a more secure form of payment, they are most costly. On the other hand, while a cheque is less costly, it is not a guaranteed form of payment.
What Is the Definition of Cheque and DD?
The definition of a cheque is an instrument of payment for a fixed amount of money to a specified person, from a specified account. The definition of a demand draft (DD) is an instrument of payment for a fixed amount of money to a specified person, guaranteed by a financial institution.
Is a Demand Draft Safer Than a Cheque?
A demand draft is generally considered safer than a cheque. This is because it is guaranteed by a financial institution instead of being issued against a person’s bank account. In other words, the funds have already been secured by the bank before the demand draft is issued. Therefore there is no risk of the demand draft not being cashed by the bank.
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