What is the Difference Between Bank Draft and Cheque?

The main difference between a bank draft and a cheque is that a bank draft is issued by the bank and guaranteed, while a cheque is issued by the customer and can bounce if there are insufficient funds. Here are some key differences between the two:

Issued by: Cheques are issued by the bank's customer, whereas bank drafts are issued by the bank itself.
Guaranteed: Bank drafts are prepaid and guaranteed by the bank, ensuring that the recipient will receive the payment. Cheques, on the other hand, are not guaranteed and can be dishonored if the account holder does not have sufficient funds.
Security: Bank drafts are considered more secure than cheques because they are signed by a bank official, making them less susceptible to fraud and misuse.
Transaction time: Bank drafts typically have faster transaction times compared to cheques, as the bank ensures that sufficient funds are available before issuing the draft.
Fees: Banks may charge fees for issuing bank drafts, while cheques may have lower or no fees depending on the bank.
Usage: Due to the guaranteed nature of bank drafts, they are often preferred for large payments, such as real estate transactions or car purchases. Cheques, on the other hand, are more commonly used for everyday transactions and can be more convenient for both the payer and payee.

In summary, bank drafts are more secure and guaranteed payment instruments issued by banks, while cheques are less secure and can bounce if there are insufficient funds. Bank drafts are often used for large payments, whereas cheques are more suitable for everyday transactions.