Demand Draft
✓ Last verified 14 Sep 2026
The short version
A demand draft is a prepaid, bank-guaranteed payment instrument - unlike a cheque, it can't bounce for insufficient funds, since the amount is deducted from the payer's account upfront when the draft is issued.
A demand draft is purchased from a bank by paying the amount upfront, and the bank itself guarantees payment to whoever the draft names - eliminating bounce risk entirely, since there's no possibility of insufficient funds by the time it's presented. This makes it useful for payments where the recipient needs certainty (a large deposit, certain government or institutional payments), even though digital transfers have made demand drafts far less common for everyday use than they once were.
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