What is the Difference Between Pay Order and Demand Draft?

The main differences between a pay order and a demand draft are:

1. Nature of the instrument: A pay order, also known as a banker's cheque, is a non-negotiable instrument that can only be cleared in the issuing branch of the bank. On the other hand, a demand draft is a negotiable instrument that can be cleared at any branch of the same bank.
2. Geographical use: Pay orders are typically used for local transactions within the same city. In contrast, demand drafts are used for payments to different states or cities and can be cleared at any branch of the issuing bank.
3. Payability: Pay orders are payable only at the issuing branch, while demand drafts are payable at any branch of the same bank.
4. Issuing authority: A pay order is a written instruction issued by a bank on behalf of its customer. A demand draft, however, is a signed, written order by the bank itself, instructing another branch of the same bank to pay a certain amount at sight or at a specific date.

In summary, if you need to make a payment within the same city, a pay order is the preferred option. If the payment needs to be made to a different city or state, a demand draft is more suitable. Both instruments are secure methods of payment, but they serve different purposes and can be processed only at specific branches of the issuing bank.

Comparative Table: Pay Order vs Demand Draft

Here is a table comparing the differences between Pay Order and Demand Draft:

Both Pay Orders (Banker's Cheques) and Demand Drafts are secure forms of payment, as the bank guarantees the funds. However, they serve different purposes and have some differences in their usage, process, and payee.