Banker's Cheque vs. Demand Draft — What's the Difference?
Edited by Tayyaba Rehman — By Fiza Rafique — Published on December 6, 2023
A Banker's Cheque is a cheque issued by a bank on its own funds, typically used for local transactions. A Demand Draft is a prepaid negotiable instrument, often used for non-local or outstation transactions.
Difference Between Banker's Cheque and Demand Draft
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Key Differences
Banker's Cheque and Demand Draft are both financial instruments offered by banks to their customers. A Banker's Cheque is essentially a cheque drawn by a bank on its own funds, guaranteeing the payment. It is typically used for transactions within the same city. On the contrary, a Demand Draft is a prepaid instrument where the bank acts on the request of its customer to pay a certain sum to the payee.
When it comes to the validity of transactions, Banker's Cheques are usually regarded as highly credible because they are backed by the issuing bank itself. This means the payment is virtually guaranteed, reducing the risk of the cheque bouncing. On the other hand, a Demand Draft is also reliable as it's prepaid, meaning the bank has already received the funds from the requester before issuing the draft.
One main distinction between a Banker's Cheque and a Demand Draft lies in their geographical use. While Banker's Cheques are predominantly used for local transactions within the same city or region, Demand Drafts are more versatile and are commonly used for non-local or outstation payments, especially when there's a need to transfer money from one city to another.
The process of obtaining a Banker's Cheque or a Demand Draft differs slightly. For a Banker's Cheque, customers need to have an account with the issuing bank. In the case of a Demand Draft, it's not mandatory for the purchaser to have an account with the bank, but they need to provide the funds upfront along with additional charges or fees.
Comparison Chart
Issuance Basis
Bank's own funds
Prepaid by customer
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Typical Use
Local transactions
Non-local or outstation transactions
Reliability
High, as issued by the bank itself
High, as it's prepaid
Geographical Applicability
Usually within the same city or region
Anywhere, more versatile
Account Requirement
Typically requires an account with the issuing bank
Not mandatory, but funds need to be provided upfront
Compare with Definitions
Banker's Cheque
A cheque drawn by a bank on its own funds.
She received a Banker's Cheque as a refund from her insurance claim.
Demand Draft
A secure method to ensure funds are received by the beneficiary.
To ensure her sister received the funds on time, she used a Demand Draft.
Banker's Cheque
A financial instrument primarily for local dealings.
She used a Banker's Cheque to buy a car from a seller in the same city.
Demand Draft
A prepaid negotiable instrument issued by a bank.
He sent a Demand Draft to pay for his son's college tuition in another state.
Banker's Cheque
A cheque that minimizes the risk of bouncing.
To avoid any payment hiccups, he requested a Banker's Cheque.
Demand Draft
An instrument ensuring payment without the risk of bouncing.
For reliable and risk-free transactions, companies often ask for a Demand Draft.
Banker's Cheque
A guaranteed payment method backed by the issuing bank.
For secure transactions, he prefers using a Banker's Cheque.
Demand Draft
A way to transfer money to a payee, typically for outstation payments.
She requested a Demand Draft to settle a business deal in another city.
Banker's Cheque
A trusted mode of payment for significant local transactions.
The realtor advised using a Banker's Cheque for the property down payment.
Demand Draft
A financial tool not requiring the purchaser to hold a bank account.
Although he didn't have an account, he could still obtain a Demand Draft.
Common Curiosities
When should one use a Demand Draft?
One should use a Demand Draft for non-local or outstation transactions, especially when transferring money to another city.
What is a Banker's Cheque?
A Banker's Cheque is a cheque issued by a bank on its own funds, typically for local transactions.
What is a Demand Draft?
A Demand Draft is a prepaid negotiable instrument issued by a bank, often used for transferring money to another location.
Are there fees associated with a Banker's Cheque or Demand Draft?
Yes, banks typically charge a fee for issuing both a Banker's Cheque and a Demand Draft.
Are there expiration dates on these instruments?
Both Banker's Cheques and Demand Drafts generally have validity periods, often six months, after which they become stale.
Can a Demand Draft be reissued if lost?
Yes, after following certain procedures and declarations, a Demand Draft can be reissued.
How quickly can a Banker's Cheque or Demand Draft be processed?
While processing times vary, most banks can issue a Banker's Cheque or Demand Draft relatively quickly, often within the same day.
Who can purchase a Demand Draft?
Anyone can purchase a Demand Draft, even if they don't have an account with the issuing bank.
How is a Banker's Cheque different from a regular cheque?
Unlike a regular cheque drawn against an individual's account, a Banker's Cheque is drawn on the bank's funds, making it more secure.
Is a Demand Draft safer than a personal cheque?
Yes, since a Demand Draft is prepaid, it eliminates the risk of bouncing, unlike a personal cheque.
Between Banker's Cheque and Demand Draft, which is more versatile?
Demand Drafts are more versatile, suitable for both local and non-local transactions, while Banker's Cheques are primarily for local use.
Can a Banker's Cheque be canceled?
Yes, but the process can be complex and may require the consent of the beneficiary.
How secure is a Banker's Cheque?
Highly secure, as it's backed by the bank's own funds.
Is a Banker's Cheque only valid in the city of issuance?
Typically, yes. Banker's Cheques are usually used for local transactions within the issuing city or region.
Can a Demand Draft be issued in foreign currency?
Yes, many banks offer Demand Drafts in foreign currencies for international transactions.
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Written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
