1. What is a Bank Draft or Demand Draft ?
Bank Draft is also called as Demand Draft, in short, DD. DD is a special type of cheque. It is drawn by a bank on any of the branches of the same bank. It is used for remitting money from one place to another place. It is the cheapest mode of sending money. It is an order to pay money on demand.
Image Credits © Tuxedo Travels.
The person who wants to send the money has to approach bank, he has to fill an application form and has to pay the required amount with commission (bank's service charge). After getting the draft, applicant has to send it by post to the party at the other place.
DD is like a cheque, therefore it can also be crossed. When the other party receives it, has to present it to the bank for payment. It is the easiest and safest way of sending money from one place to another place.
2. What is a Mail and Telegraphic Transfer ?
Mail and Telegraphic Transfer is another method of sending money from one place to another place by using the letter (mail). The mail transfer (MT) is possible only when the sender (remitter) and the receiver (remittee) both are having bank accounts in the same bank, but at different branches. Generally, no charges are charged by bank for mail transfer. In this the remitter has to inform his bank to transfer a certain amount from his account to the another person's account in other branch of the same bank. The details of the remittee (receiver) such as his name, account number, the branch where he has account, etc. must be provided to the bank.
3. What is an Overdraft ? Explain Overdraft Facility
Overdraft is one type of loan given by the bank to its current account holder. When bank allows the current account holder to withdraw amount over and above the credit balance as per an agreement then it is called as Overdraft Facility. Overdraft is a short term loan but it can be continued from time to time. Banks give this facility after taking security or personal guarantee. This overdraft is a kind of temporary loan and bank charges interest on actual amount which is overdrawn by the customer i.e. account holder. They are allowed to overdraw the amount up to a certain limit by issuing cheques to other parties or for own business use, from their current accounts. Overdraft facility is given generally, for few months.