Difference Between Bank Draft and Certified Cheque

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Certified cheques and bank drafts are some of the services banks offer to their customers, which help them pay for goods and services. Though they sound similar, there are several points in which they differ. Both of these instruments draw from available funds in the bank account. The goal is the same. However, the method to achieve the same objective is different. Understanding how these instruments work is important in choosing the right one for your situation.

Many businesses accept card payments, but sometimes a negotiable instrumentNegotiable InstrumentA negotiable instrument refers to the transferrable and signed written document whereby the payer guarantees or promises to pay a certain sum on a specific future date or as on-demand to the payee or bearer. It includes bills of exchange, delivery order, promissory note, customer receipt, etc.read more like a certified cheque and bank draft are requested. Both are treated as equivalent to cash.

The main difference is based on who issues them and at what stage the bank withdraws the amount from the account to cover the cheque.

Bank Draft vs Certified Cheque Infographics

Key Differences

The key differences are as follows: –

  • The key difference is that a certified cheque is used by its customers to pay for goods and services, and a bank draft is an instrument one can use for the same except that bank provides it.The account holder is the drawer of the cheque. On the other hand, in the case of a bank draft, the bank issues it. Therefore, the holder requesting is a drawer, and the party receiving is a payeePayeeA payee refers to a person, business, government, or any other entity that receives payment for providing goods or services.read more.For a bank draft, a signature is not required. In comparison, certified cheques require a signature and are processed when the bank employee approves them. That means enough funds are available to process the certified cheque.As the above suggests, a certified cheque is charged more than a bank draft since it is certified and signed. A bank draft is prone to fraud and can be misused. Hence, their fees are lower.A bank draft requires the date, the amount payable, and the payee’s name. Similar to this, particulars necessary for a certified cheque are date, name, amount (in words and the figure), and signature.The process followed by a bank draft is as follows: In the case of a bank draft, some bank representatives act as an intermediary.The bank issues a draft on your request but processes it only after verifying that the account has sufficient funds to cover the cheque.At this point, the bank deducts the amount from your bank account.The process is complete once the recipient deposits or cashes the draft.The procedure followed for a certified cheque is as follows: In the case of certified cheques, an intermediary has also been involved: the bank employee.The bank employee checks if the issuer has sufficient funds in the account.After it is confirmed, the employee processes it. The amount is deducted after the employee certifies it.

Bank Draft vs Certified Cheque Comparative Table

Conclusion

It is necessary to understand both of these instruments provided by the bank. The bank offers the certified cheque and bank draft and is used widely. Different countries have different names, and the result is the same even though the path is different. These instruments help in settling for goods and services. Therefore, it is very important to understand these instruments to decide which ones to use.

  • In the case of a bank draft, some bank representatives act as an intermediary.The bank issues a draft on your request but processes it only after verifying that the account has sufficient funds to cover the cheque.

  • At this point, the bank deducts the amount from your bank account.The process is complete once the recipient deposits or cashes the draft.

  • In the case of certified cheques, an intermediary has also been involved: the bank employee.The bank employee checks if the issuer has sufficient funds in the account.After it is confirmed, the employee processes it. The amount is deducted after the employee certifies it.

This article is a guide to Bank Draft vs Certified Cheque. We discuss the top differences between bank draft and certified cheque with a comparison table and infographics. You may also have a look at the following articles: –

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