Bank Draft vs Cheque vs Demand Draft Difference between Draft, Cheque and Demand Draft PDF file

What is Cheque?

Cheque is a negotiable instrument. A cheque is an official note that is written by an account holder on funds he has in an account held at an institution.  A check is guaranteed by the person who is writing it and can be returned (Bounce) for insufficient funds if the person is overdrawn on his checking account.

What is Draft?

Draft is also a negotiable instrument. Bank Draft is an official note that is written by a bank from funds verified in an account by the bank prior to issuing the bank draft. The person requesting the bank draft makes the cashier check out to the party who is to receive it. A bank draft is guaranteed by the bank that has already verified the amount of money is covered by the person requesting the bank draft.

Difference between Draft and Cheque:

a)    Cheque is issued by an account holder while Draft is issued by Bank.

b)    Bank may not charge for issuing of Cheque book but it charges a fee for issuing a Draft.

c)    In case of cheque Drawer is the customer of the bank but in Draft the drawer is the bank itself.

d)    Current Account and Saving account holder get a cheque facility but Draft can be issued to anyone.

e)    Cheque is guaranteed by the person who is writing it while Draft is guaranteed by the Bank.

f)     Cheque can be payable to bearer but a Draft cannot.

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