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Banker's Cheque vs. Demand Draft — What's the Difference?

Edited by Tayyaba Rehman — By Fiza Rafique — Published on December 6, 2023
A Banker's Cheque is a cheque issued by a bank on its own funds, typically used for local transactions. A Demand Draft is a prepaid negotiable instrument, often used for non-local or outstation transactions.
Banker's Cheque vs. Demand Draft — What's the Difference?

Difference Between Banker's Cheque and Demand Draft

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Key Differences

Banker's Cheque and Demand Draft are both financial instruments offered by banks to their customers. A Banker's Cheque is essentially a cheque drawn by a bank on its own funds, guaranteeing the payment. It is typically used for transactions within the same city. On the contrary, a Demand Draft is a prepaid instrument where the bank acts on the request of its customer to pay a certain sum to the payee.
Fiza Rafique
Dec 06, 2023
When it comes to the validity of transactions, Banker's Cheques are usually regarded as highly credible because they are backed by the issuing bank itself. This means the payment is virtually guaranteed, reducing the risk of the cheque bouncing. On the other hand, a Demand Draft is also reliable as it's prepaid, meaning the bank has already received the funds from the requester before issuing the draft.
Fiza Rafique
Dec 06, 2023
One main distinction between a Banker's Cheque and a Demand Draft lies in their geographical use. While Banker's Cheques are predominantly used for local transactions within the same city or region, Demand Drafts are more versatile and are commonly used for non-local or outstation payments, especially when there's a need to transfer money from one city to another.
Fiza Rafique
Dec 06, 2023
The process of obtaining a Banker's Cheque or a Demand Draft differs slightly. For a Banker's Cheque, customers need to have an account with the issuing bank. In the case of a Demand Draft, it's not mandatory for the purchaser to have an account with the bank, but they need to provide the funds upfront along with additional charges or fees.
Fiza Rafique
Dec 06, 2023

Comparison Chart

Issuance Basis

Bank's own funds
Prepaid by customer
Fiza Rafique
Dec 06, 2023
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Typical Use

Local transactions
Non-local or outstation transactions
Fiza Rafique
Dec 06, 2023

Reliability

High, as issued by the bank itself
High, as it's prepaid
Fiza Rafique
Dec 06, 2023

Geographical Applicability

Usually within the same city or region
Anywhere, more versatile
Fiza Rafique
Dec 06, 2023

Account Requirement

Typically requires an account with the issuing bank
Not mandatory, but funds need to be provided upfront
Fiza Rafique
Dec 06, 2023

Compare with Definitions

Banker's Cheque

A cheque drawn by a bank on its own funds.
She received a Banker's Cheque as a refund from her insurance claim.
Fiza Rafique
Oct 26, 2023

Demand Draft

A secure method to ensure funds are received by the beneficiary.
To ensure her sister received the funds on time, she used a Demand Draft.
Fiza Rafique
Oct 26, 2023

Banker's Cheque

A financial instrument primarily for local dealings.
She used a Banker's Cheque to buy a car from a seller in the same city.
Fiza Rafique
Oct 26, 2023

Demand Draft

A prepaid negotiable instrument issued by a bank.
He sent a Demand Draft to pay for his son's college tuition in another state.
Fiza Rafique
Oct 26, 2023

Banker's Cheque

A cheque that minimizes the risk of bouncing.
To avoid any payment hiccups, he requested a Banker's Cheque.
Fiza Rafique
Oct 26, 2023

Demand Draft

An instrument ensuring payment without the risk of bouncing.
For reliable and risk-free transactions, companies often ask for a Demand Draft.
Fiza Rafique
Oct 26, 2023

Banker's Cheque

A guaranteed payment method backed by the issuing bank.
For secure transactions, he prefers using a Banker's Cheque.
Fiza Rafique
Oct 26, 2023

Demand Draft

A way to transfer money to a payee, typically for outstation payments.
She requested a Demand Draft to settle a business deal in another city.
Fiza Rafique
Oct 26, 2023

Banker's Cheque

A trusted mode of payment for significant local transactions.
The realtor advised using a Banker's Cheque for the property down payment.
Fiza Rafique
Oct 26, 2023

Demand Draft

A financial tool not requiring the purchaser to hold a bank account.
Although he didn't have an account, he could still obtain a Demand Draft.
Fiza Rafique
Oct 26, 2023

Common Curiosities

When should one use a Demand Draft?

One should use a Demand Draft for non-local or outstation transactions, especially when transferring money to another city.
Fiza Rafique
Dec 06, 2023

What is a Banker's Cheque?

A Banker's Cheque is a cheque issued by a bank on its own funds, typically for local transactions.
Fiza Rafique
Dec 06, 2023

What is a Demand Draft?

A Demand Draft is a prepaid negotiable instrument issued by a bank, often used for transferring money to another location.
Fiza Rafique
Dec 06, 2023

Are there fees associated with a Banker's Cheque or Demand Draft?

Yes, banks typically charge a fee for issuing both a Banker's Cheque and a Demand Draft.
Fiza Rafique
Dec 06, 2023

Are there expiration dates on these instruments?

Both Banker's Cheques and Demand Drafts generally have validity periods, often six months, after which they become stale.
Fiza Rafique
Dec 06, 2023

Can a Demand Draft be reissued if lost?

Yes, after following certain procedures and declarations, a Demand Draft can be reissued.
Fiza Rafique
Dec 06, 2023

How quickly can a Banker's Cheque or Demand Draft be processed?

While processing times vary, most banks can issue a Banker's Cheque or Demand Draft relatively quickly, often within the same day.
Fiza Rafique
Dec 06, 2023

Who can purchase a Demand Draft?

Anyone can purchase a Demand Draft, even if they don't have an account with the issuing bank.
Fiza Rafique
Dec 06, 2023

How is a Banker's Cheque different from a regular cheque?

Unlike a regular cheque drawn against an individual's account, a Banker's Cheque is drawn on the bank's funds, making it more secure.
Fiza Rafique
Dec 06, 2023

Is a Demand Draft safer than a personal cheque?

Yes, since a Demand Draft is prepaid, it eliminates the risk of bouncing, unlike a personal cheque.
Fiza Rafique
Dec 06, 2023

Between Banker's Cheque and Demand Draft, which is more versatile?

Demand Drafts are more versatile, suitable for both local and non-local transactions, while Banker's Cheques are primarily for local use.
Fiza Rafique
Dec 06, 2023

Can a Banker's Cheque be canceled?

Yes, but the process can be complex and may require the consent of the beneficiary.
Fiza Rafique
Dec 06, 2023

How secure is a Banker's Cheque?

Highly secure, as it's backed by the bank's own funds.
Fiza Rafique
Dec 06, 2023

Is a Banker's Cheque only valid in the city of issuance?

Typically, yes. Banker's Cheques are usually used for local transactions within the issuing city or region.
Fiza Rafique
Dec 06, 2023

Can a Demand Draft be issued in foreign currency?

Yes, many banks offer Demand Drafts in foreign currencies for international transactions.
Fiza Rafique
Dec 06, 2023

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Author Spotlight

Written by
Fiza Rafique
Fiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
Tayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.

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