Difference Between Demand Draft and Cheque
Demand Draft can be defined as a method used by people to make transfer payments from one bank to another. In other words it is a written order for making payments and hence it does not require a signature in order to be cashed (which distinguishes it from cheque which requires the signature in order to be cashed). Also in case of demand draft bank take advance or directly debit the account and hence issuer of demand draft need to have enough balance in the account which is not the case with the cheque ,it can be issued even if issuer don’t have enough balance in the account. Demand drafts are frequently used by customers to purchase items over the phone, from telemarketers. The person making payments is called drawee and the recipient is called payee and the bank providing the service is called drawer. Demand draft can be of 2 types –
- Sight Draft – In this type of draft money transfer can be done only when proper documents are produced on sight.
- Time Draft – In this type of draft money can be transferred only after a specific period of time.
However, demand draft are open to fraud because of the lack of a signature required to authorize the transfer, so the only information required to make a demand draft is a bank account number and a bank routing number which can be easily found on a standard cheque.
Tags: Types of demand draft