Cheque vs. Demand Draft — What's the Difference?
By Tayyaba Rehman — Published on November 11, 2023
A cheque is a written order to a bank to pay a specified amount from the writer's account, while a demand draft is a pre-paid instrument, where the amount is paid before the draft is issued by the bank.
Difference Between Cheque and Demand Draft
Table of Contents
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Key Differences
A cheque is a financial tool that allows a person to transfer a specified sum of money from their account to the recipient's name. A cheque holds a certain level of trust, given that it is contingent on the availability of sufficient funds in the issuer's account. On the other hand, a demand draft carries more financial security because the amount is paid upfront, ensuring the availability of funds upon presentation.
In the realm of acceptance, a cheque can be written by any individual or entity holding a bank account and is generally accepted by parties familiar with each other. Contrarily, a demand draft is usually accepted universally since the payment has been made in advance, ensuring a lower risk of bounce or failure.
The aspect of security and reliability is more pronounced in demand drafts compared to cheques. A cheque can be bounced due to insufficient funds, leading to financial and legal hassles for the recipient. Meanwhile, since a demand draft involves prepayment, its financial credibility is generally robust and devoid of such risks.
Cheques are typically utilized for everyday transactions and can be either open (bearer) or crossed (account payee only). Meanwhile, demand drafts are frequently used for larger amounts where the payer wants to ensure that the payment is secure and reaches the recipient without any potential issues or risks.
In terms of geographic usage, cheques are predominantly used for local transactions due to the involved clearing process. Conversely, demand drafts can be and are often used for both local and distant transactions, providing a secure mode of payment across varied geographies.
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Comparison Chart
Spelling
Cheque is spelled as "check" in American English
No spelling variations exist
Grammatical Role
Can be used as a noun and a verb
Predominantly used as a noun
Plurality
Plural form is "cheques"
Plural form is "demand drafts"
Article Usage
Used with "a" (e.g., a cheque)
Used with "a" (e.g., a demand draft)
Example Usage
“He wrote a cheque for $100.”
“She requested a demand draft for $2,000.”
Compare with Definitions
Cheque
A cheque can serve as a proof of payment, aiding in maintaining transaction records.
She keeps all her cheques as a backup for financial records.
Demand Draft
A demand draft can be made payable either to the bearer or to a specified individual.
The demand draft was made in favor of the university for tuition fees.
Cheque
A cheque is a document that orders a bank to pay a specified sum from the drawer's account.
He wrote a cheque for two hundred dollars.
Demand Draft
A demand draft is typically considered a more secure method of payment than a cheque.
For the college fee, she preferred a demand draft over a cheque for reliability.
Cheque
A cheque can be post-dated, meaning it is not valid until a future date.
She wrote a cheque with a date for next month.
Demand Draft
A demand draft is a negotiable instrument used for transferring money from one place to another.
He used a demand draft to send money to his parents in another city.
Cheque
A cheque can either be open or crossed to enhance its security.
He issued a crossed cheque to ensure it reaches the correct recipient.
Demand Draft
A demand draft usually involves some amount of commission or charge for its issuance.
He paid an additional commission to the bank for issuing the demand draft.
Cheque
A cheque can bounce if there are insufficient funds in the account.
The cheque he gave me last week has bounced.
Demand Draft
A demand draft requires upfront payment from the issuer before it is issued by the bank.
The bank prepared a demand draft after receiving payment from her account.
Cheque
Variant of check.
Cheque
A draft directing a bank to pay money to a named person or entity.
I was not carrying cash, so I wrote a cheque for the amount.
Sometimes abbreviations are used (which would be explained on the statement) and only the last three figures of the cheque number may be given. ‘Sundries’ are cash or cheques paid into the account.
You can avoid dealing with paper cheques — written or printed — by paying your bills online.
The daily cheque clearings began around 1770 when bank clerks met at the Five Bells (a tavern in Lombard Street in the City of London) to exchange all their cheques in one place and settle the balances in cash.
Cheque
Obsolete form of chequy
Cheque
See Check.
Cheque
A written order directing a bank to pay money;
He paid all his bills by check
Cheque
Withdraw money by writing a check
Common Curiosities
What is a cheque?
A cheque is a document that instructs a bank to pay a specific amount from the drawer's account to the payee.
Can a cheque be post-dated?
Yes, a cheque can be post-dated, meaning it will only be valid for cashing on or after the date mentioned on it.
Is a demand draft secure?
Yes, a demand draft is often considered more secure than a cheque as the payment is made upfront.
What are the main types of cheques?
Main types include personal cheques, cashier's cheques, and certified cheques, each having different levels of security and purpose.
What is a demand draft?
A demand draft is a financial instrument that is used to transfer money from one party to another, and the amount is paid before the draft is issued.
Can a cheque bounce?
Yes, a cheque can bounce if there are insufficient funds in the issuer's account or if there are other discrepancies like a mismatch of signature.
Can a cheque expire?
Yes, cheques typically become stale-dated after six months unless it is a certified cheque.
Is a demand draft safe for large transactions?
Yes, a demand draft is usually considered a safe method for transferring large sums of money as payment is made before issuance.
Can a cheque be canceled after being issued?
Yes, a cheque can be canceled or stopped by contacting the bank, although some conditions may apply.
What does a “bounced” cheque mean?
A cheque "bounces" when it cannot be processed due to insufficient funds in the account.
How do I decide whether to use a cheque or a demand draft?
The choice between a cheque and a demand draft often depends on the payee’s preference, the required security level, and the urgency of the payment.
Can a demand draft be canceled?
Yes, generally a demand draft can be canceled by the person who requested it, subject to specific terms and conditions.
Is there a minimum amount for a demand draft?
No, there is no minimum amount for a demand draft and it can be made for any amount.
Can both cheques and demand drafts be used internationally?
While both can be used for international transactions, demand drafts are commonly preferred due to their reliability and predetermined payment.
Which is considered more secure, a cheque or a demand draft?
A demand draft is often considered more secure than a cheque since the payment is made upfront.
Are there charges associated with issuing cheques and demand drafts?
While issuing cheques usually does not incur charges, creating a demand draft generally involves a nominal fee.
Can a demand draft bounce?
No, a demand draft cannot bounce as the amount is paid to the bank before it is issued.
Can both cheques and demand drafts be reissued if lost?
Yes, both can generally be reissued with certain declarations and indemnities, though processes may vary.
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Written 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.
