Question

Explain the difference between cheque and bank draft.

Hint:

A bank draft is more reliable than a cheque as it guarantees payment, making it a safer option for large transactions.

Answer 1

A cheque is a written order directing a bank to pay a specific amount from the issuer's account to the payee. It can bounce if there are insufficient funds. A bank draft, however, is a pre-paid payment method issued by a bank, guaranteeing the funds. Since it is drawn against the bank's own funds, it is considered more secure and cannot bounce.