Demand Draft
Candlefocus EditorBanks issue demand drafts, typically during in-person transactions, meaning the drawer and the payee are physically present at the time of the transaction. The drawer makes the payment by presenting cash or another form of payment at the bank and the teller then exchanges it for the demand draft. These documents can also be purchased at select retail outlets that offer financial services.
When a bank issues a demand draft, it is seen as an irrevocable order, meaning it cannot be changed or stopped after it has been issued. As a result, a demand draft typically requires payment upfront from the drawer as the instrument is non-refundable.
Demand drafts are also safer than checks and provide an extra layer of security for transfers. The drawer does not need to provide personal information, such as bank account numbers or the routing number of their financial institution, but the payee may need a valid identification number, such as a social security number or other valid form of ID, in order to deposit the money.
Due to the increased risk of fraud associated with demand drafts, there are now regulations in place to protect victims of such occurrences. If someone is a victim of fraud, they can contact the holding bank and file a claim. The bank then monitors the transaction and acts accordingly, depending on the situation.
In conclusion, a demand draft is a secure and reliable alternative to writing checks that allows people to transfer funds without the need for a signature. They are easy to use and are considered safer than checks due to the extra layer of security provided. However, demand drafts are non-refundable and it is important to understand the regulations that accompany their use to protect from any fraudulent activity.