Demand Draft vs Cheque: Key Differences Explained

A demand draft (DD) and a cheque are both ways to pay by paper instrument, but they differ in one key way: who guarantees the payment.

Cheque

• Issued by an account holder; the bank pays only if funds are available.
• Can bounce if the account lacks balance (see cheque bounce).
• Free to issue; flexible (post-dated, crossed, bearer).

Demand draft (DD)

• Issued by the bank itself after debiting the amount upfront — so it is guaranteed and cannot bounce.
• The bank charges a small fee to issue it.
• Commonly required for admissions, tenders and high-value or out-station payments.

Which is safer?

A DD is safer for the receiver because payment is guaranteed. A cheque is more convenient and free for routine payments. A banker's cheque is similar to a DD but usually for same-city payments.

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