Differences Between Cheque and Demand Draft



Differences Between Cheque and Demand Draft

Cheque: Differences Between Cheque and Demand Draft

  1. 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.
  2. Payment is made after presenting the cheque to the bank.
  3. A cheque can bounce due to insufficient balance.
  4. Payment of cheque can be stopped by the drawee.
  5. A cheque can be paid to bearer or order.
  6. A cheque needs the signature to transfer amount.
  7. Payable either to order or to bearer.
  8. A cheque is issued by an individual.
  9. There is no any bank charges.
  10. A drawer is the customer of the bank.
  11. Three Parties are involved – Drawer, Drawee, Payee.
  12. All banker’s cheque is pre-printed with “NOT NEGOTIABLE”.
  13. It can be cleared in any branch of the same city.
  14. 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”.
  15. A cheque is defined in the Negotiable Instrument Act, 1881.
  16. A cheque requires a signature of the issuing individual or the authorized official of the firm.
  17. Payment of a cheque can be stopped by the drawer of the cheque

Demand Draft: Differences Between Cheque and Demand Draft

  1. Demand Draft is a negotiable instrument used for the transfer of money from one place to another.
  2. DD is given after making payment to the bank.
  3. Demand Draft can’t be dishonored as the amount is paid beforehand.
  4. DD is paid to a person on order.
  5. Demand Draft does not require the signature to transfer funds.
  6. In DD, both parties are banks.
  7. Demand Draft is issued by a bank.
  8. There are bank charges according to an amount. Different banks can charge differently for the issue of DD.
  9. The drawer is bank itself.
  10. Two Parties are involved – Drawer, Payee
  11. Demand draft of Rs. 20000 or more should be issued with “A/c payee” crossing.
  12. It can be cleared at any branch of the same bank.
  13. 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.
  14. Although a Demand Draft is also a type of negotiable instrument, it is not defined in the N.I. Act, 1881.
  15. It requires the stamp of the authorized officer/officers of the bank along with the rubber stamp of the bank.
  16. The payment of a draft cannot be stopped.



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