What exactly is a request for payment?

Definition and Examples of a Demand Draft

A demand draft is a payment option that allows the receiver to withdraw money from your bank account. Unlike a regular check, it does not require your signature. It may also be known as a telephone check, preauthorized drafts, or remotely created checks.

How a Demand Draft Works

When the drawee presents the demand draft to the bank, they can access the money you wish to transfer. You can request a demand draft at your local bank or credit union, or even complete the process online for convenience. For example, you might use a demand draft to pay for college tuition or make a secure international money transfer.

Requirements for a Demand Draft

To complete the demand draft form, your bank will request information about yourself, the drawee, and the transaction. This includes providing bank account and routing numbers, drawee details, transaction reasons, amount, and currency. You will usually pay a fee for this service, which can vary based on the amount sent and drawee’s bank.

Demand Draft Transactions

With a demand draft, your bank transfers the money to the drawee’s bank, allowing the drawee to access the funds as needed. Once the drawee has the demand draft and receives the money, you generally cannot cancel the transaction. However, you may have an option to cancel an uncashed demand draft for a fee.

Pros and Cons of Demand Drafts

Pros Cons

Guaranteed funds ensure that the money is taken from your account when sending a demand draft, making it a reliable payment method for large transactions. However, fees may apply, and there is a risk of fraud if not careful. Unlike personal checks, demand drafts are not cancellable after delivery, presenting a potential drawback.

Demand Draft vs. Personal Check

While a personal check may bounce if funds are insufficient, a demand draft guarantees the availability of funds. Personal checks are issued by the account holder and require a signature, whereas demand drafts are issued by the bank and do not need a signature.