What are the differences between a Cheque and a Demand Draft? - Aware Banking

Cheque: Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the maker/depositor’s name with that Bank.

Demand Draft (DD): A demand draft is an instrument used for effecting the transfer of money. It is a Negotiable Instrument.

What are the differences between a Cheque and a Demand Draft?

Cheque	Demand Draft
A cheque is issued by an individual.	A Demand Draft is issued by a bank.
A cheque is an order of payment from an account holder to the bank.	A Demand Draft is an order of payment by a bank to another bank.
Payment is made of the cheque issued after the presentation of a cheque for encashment.	Payment is to be made to the Drawer Bank before the issuance of a draft.
There are three parties involved in the case of a cheque: Drawer of the cheque, Drawee of the cheque, and the Payee.	In the case of a draft, two parties are involved: Drawer and the Payee.
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”.	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.
The drawer is the account holder of the bank.	Drawer is bank itself issuing the draft for a specific customer.
A cheque may be dishonored for lack of sufficient funds in the account of the drawer of the cheque.	A Demand Draft cannot be returned because it is a prepaid instrument.
A cheque can be paid either to the bearer (who presents the cheque to the bank) or order (whose name is specified on the cheque).	A Demand Draft is always payable to a specified party.
A cheque is defined in the Negotiable Instrument Act, 1881.	Although a Demand Draft is also a type of negotiable instrument, it is not defined in the N.I. Act, 1881.
A cheque requires a sign of the issuing individual or the authorized official of the firm.	It requires the stamp of the authorized officer/officers of the bank along with the rubber stamp of the bank.
No bank charges are levied while issuing a cheque.	Bank commission is charged to the account of the account holder for issuing of a draft or it is charged in cash.
Individual/firm issuing cheque must have a Savings Bank A/c or Current Account in the bank.	Individual/Party getting issued a Demand Draft may not necessarily be having a bank account in the bank. Demand Draft can be made in cash if the amount does not exceed Rs.50, 000/-.