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Cheque or Demand Draft?

Even though many of our financial transactions are going digital, there still are occasions when we need to make payments with physical instruments such as cheques and demand drafts

Even though many of our financial transactions are going digital through cards, e-wallets, apps and net-banking, there still are occasions when we need to make payments with physical instrument such as cheques and demand drafts. Shaikh Zoaib Saleem looks at the advantages and disadvantages of both.

Ease

Most banks provide a cheque book to customers. Even if you exhaust these cheques, more can be requested relatively easily. Further, issuing a cheque is a simple process and can be done anywhere, anytime. In case of a demand draft, the process is not that easy. A form has to be filled and submitted to the branch, which then takes a certain amount of time to process the request.

Cheque: Good Demand draft: Bad

Charges

Most banks give a cheque book without any extra charges, at least once in a quarter, to all their savings account customers. There are no other transaction charges for withdrawal through it. But you have to pay a amount-based commission and service tax. Demand drafts come at a charge. For instance, there is a fee of 50 for a draft of 0,000. It increases with higher amount.

Cheque: Good Demand Draft: Bad

Default

A demand-draft is a pre-paid instrument, while a cheque is not. In case of a demand draft, there are no chances of a default as the amount has already been paid. On the other hand, a cheque can get dishonoured if the account from which money has to be debited doesn’t have sufficient funds. So a demand draft eliminates the element of doubt and you can be confident of payment.

Cheque: Good Demand Draft: Bad

Misuse

If a cheque is lost and it’s not an account payee cheque, there are chances of it being misused if you fail to inform the bank in time. Also, if not kept properly, there are chances of cheque leaves getting misplaced or lost. But a demand draft is made only on request. Also, it is an account payee instrument. So, even if it’s lost, it can be cancelled using the counter-file to prevent misuse.

Cheque: Bad Demand Draft: Good

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