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Question
Distinguish between the following:
Cheque & Bank Overdraft
Solution
| Sr. No. | Basis of Difference | Cheque | Bank Overdraft |
| 1. | Meaning | It is an unconditional order directing the bank to pay a mentioned amount to a certain person. |
It is a facility given to a current account holder to withdraw amount more than what he/she has in his/her account. |
| 2. | Charges | There are no charges | Interest is charged |
| 3. | Eligibility | All account holders are eligible for this facility. |
Only current account holders can enjoy this facility. |
| 4. | Dishonour | It can be dishonoured | It can never be dishonoured. |
| 5. | Fee | No fee is charged on the issue of a cheque. |
A small amount of fee is charged on the issuance of draft. |
| 6. | Reliability | A cheque might not get cleared due to numerous reasons like mismatch of signature and unavailability of funds. |
As it is issued only after the receipt of payment, it is more reliable. |
| 7. | Aim | It aims at facilitating businessman for effecting local payments. | It aims at facilitating immediate outstation payments. |
| 8. | Drawer | The drawer is the account holder of the bank. | A draft is the bank itself. |
| 9. | Facility extended to | Cheque facility is extended to account holders of the bank only. | A draft facility is extended to both account holders of the bank as well as outsiders. |
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