Differences Between Cheque and Demand Draft
Table of Contents
Cheque: Differences Between Cheque and Demand Draft
- A cheque is a negotiable instrument which contains an order to the bank, signed by the drawer, to pay a certain sum of money to a specified person.
- Payment is made after presenting the cheque to the bank.
- A cheque can bounce due to insufficient balance.
- Payment of cheque can be stopped by the drawee.
- A cheque can be paid to bearer or order.
- A cheque needs the signature to transfer amount.
- Payable either to order or to bearer.
- A cheque is issued by an individual.
- There is no any bank charges.
- A drawer is the customer of the bank.
- Three Parties are involved – Drawer, Drawee, Payee.
- All banker’s cheque is pre-printed with “NOT NEGOTIABLE”.
- It can be cleared in any branch of the same city.
- Drawer and Payee may be two different persons – if the payment is to be made to any third party. Drawer and the Payee may be the same person if the cheque is drawn on “Self”.
- A cheque is defined in the Negotiable Instrument Act, 1881.
- A cheque requires a signature of the issuing individual or the authorized official of the firm.
- Payment of a cheque can be stopped by the drawer of the cheque
Demand Draft: Differences Between Cheque and Demand Draft
- Demand Draft is a negotiable instrument used for the transfer of money from one place to another.
- DD is given after making payment to the bank.
- Demand Draft can’t be dishonored as the amount is paid beforehand.
- DD is paid to a person on order.
- Demand Draft does not require the signature to transfer funds.
- In DD, both parties are banks.
- Demand Draft is issued by a bank.
- There are bank charges according to an amount. Different banks can charge differently for the issue of DD.
- The drawer is bank itself.
- Two Parties are involved – Drawer, Payee
- Demand draft of Rs. 20000 or more should be issued with “A/c payee” crossing.
- It can be cleared at any branch of the same bank.
- Drawer and Drawee are two different branches but of the same bank. The payee is the third party to whom the payment is to be made.
- Although a Demand Draft is also a type of negotiable instrument, it is not defined in the N.I. Act, 1881.
- It requires the stamp of the authorized officer/officers of the bank along with the rubber stamp of the bank.
- The payment of a draft cannot be stopped.