You’ll often have to fill out an application form with the required details including the amount to be paid, the name of the payee, and other relevant information. So, both the instruments, cheque and demand drafts have their own uses and limitations. To deal with millions of transactions on a daily basis, one can avail the benefits of a cheque, which is easy and convenient to issue.
The amount mentioned on the cheque is fixed and written both in numbers and words (e.g., ₹5,000 and “Five Thousand Rupees Only”). This ensures that the exact sum is paid to the payee, leaving no room for disputes or fraud. Once the payee’s name is written on the cheque, it cannot be changed or altered. This provides certainty that the payment will reach the intended recipient. This feature adds security and prevents any unauthorized redirection of funds.
- To deal with millions of transactions on a daily basis, one can avail the benefits of a cheque, which is easy and convenient to issue.
- You can issue it remotely (like through mobile, fax, or electronically) as a signature is not compulsory.
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- The exact time frame can depend on the policies and processes of the banks involved.
A cheque is a direct and unconditional order from the account holder (drawer) to the bank. This means the bank is obligated to pay the amount mentioned without any conditions or additional permissions from the drawer. Many organizations, especially government organizations, use demand drafts to make payments to their employees and pensioners.
Types of cheque
As the demand draft amount has already been collected by the drawer bank, the payment is immediately released on presenting of the demand draft by the payee. This type of cheque can be used to pay a specific organization or a person. These cheques can be availed by the persons whose names specified in the cheque. Sight Demand Draft is payable on demand and the payee can claim the payment as soon as they present it at the bank.
Sight demand draft-
Lastly, a cheque is drawn on the account holder’s behalf, while a demand draft is drawn on the bank’s behalf. Both are an integral part of the financial system and used as per the requirements and comfort of the user. Cheques and demand drafts are commonly used financial instruments for making payments.
Demand Draft vs. Online Payment System
If ‘Self‘ is written on the cheque, it is considered as self cheque, which can be used for withdrawing money from owns bank to transfer money to any person or third party. They are highly exposed to threat as anyone can claim to withdraw funds. You can directly request a demand draft from your bank by paying the required amount and any applicable fees. Demand drafts are mostly used for larger transactions or payments where security is essential.
Moreover, demand drafts are also useful in cases where the buyer and seller are not located in the same city or state. In banking terms, a demand draft or DD is a negotiable instrument that you can use to transfer funds without having the account details of the recipient. The payee can credit the amount in their bank account by submitting the demand draft at their nearest branch. Equipping yourself with these difference between cheque and dd details about a DD makes it easy for you to transfer funds across bank accounts without the risk of rejection. The receiver can only transfer the demand draft amount to their bank account after a specific time, as mentioned on the DD.
