Choosing a pay order vs demand draft depends on your payment requirements and several other factors. This is because while these banking instruments serve the same purpose, they differ in features.
Although the use of these payment methods has reduced over the years, several merchants and individuals still rely on them. As such, knowing the difference between a pay order and a demand draft can help you choose the right option when needed.
Read on to know the pay order and demand draft differences, features and more.
A pay order, also called a banker’s cheque, is issued by the bank on the customer’s behalf, allowing them to pay a third party. With this, you can make secure and cashless payments when you don’t have the beneficiary’s banking details.
To generate a payment order, you must give the banking executive the required amount in cash or cheque. Once the banker issues a pay order, the same amount will get remitted into the beneficiary’s account on deposit. It is a non-negotiable or pre-paid instrument with zero credit risk. Here are some other features of a pay order:
Also Read: What is a demand draft in banking?
A demand Draft (DD) is a negotiable instrument that the bank issues at the customer’s request. This allows the customers to make payments without the risk of cheque bounce or dishonour.
Similar to the pay order, it requires the customer to pay beforehand to make payment to third-party beneficiaries without the banking details. However, unlike a pay order, it allows you to make payments in any bank branch even outside the city. Here’s an overview of key features of demand drafts.
Here’s how a pay order differs from DD and vice-versa.
|It is a non-negotiable instrument
|It is a negotiable instrument
|Encashment can be at any branch of the bank within the city
|Encashment can be done at any bank branch within or beyond the city
With these differences in mind, you can easily choose between a pay order and a demand draft to transfer funds. However, if you do not have sufficient funds in your account, you can apply for personal loan to maintain the balance for clearing your payment.
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A pay order is a non-negotiable financial instrument that allows payments within the same city. This is a secure method acknowledged by the bank, which gives a guarantee of payment to the receiver.
Pay orders are generally cleared within 24 hours of deposit but can remain valid for up to 3 months after issuance.
No, once issued by the bank, there is no option to cancel a pay order.
A pay order is a type of cheque that the banking executive drafts, while account holders can write a cheque themselves.