Cheque vs. Demand Draft: Key Differences Explained
Cheque is a paper order you sign, telling your bank to pay a set amount to the person named on it. Demand Draft is a prepaid instrument issued by a bank itself, guaranteeing payment to the receiver.
People mix them up because both move money without cash. The twist: cheques bounce if your balance is low, while drafts feel safer because the bank already secured the funds—so many pick drafts for big or urgent payments.
Key Differences
A cheque is drawn by you on your account and can be stopped; a demand draft is drawn by the bank on its own funds and usually cannot be stopped. Cheques need your signature, drafts need you to pay the bank first.
Which One Should You Choose?
Use a cheque for routine bills and trusted friends; it’s free and quick. Choose a demand draft when the receiver wants rock-solid assurance—think college fees or property deposits—since the bank’s backing lowers the risk of payment failure.
Examples and Daily Life
Landlords often ask for a rent cheque each month. Meanwhile, coaching centres prefer a demand draft during admission season because parents from out of town can mail a draft without worrying about clearance delays.
Can a cheque be cancelled after handing it over?
Yes, you can issue a stop-payment request to your bank before it is cleared.
Is a demand draft always safer than a cheque?
Generally yes, because the bank has already collected the money, but drafts can still be forged, so verify with the issuing bank.