Pay Order

Pay order is a financial instrument which is issued by the bank on customer’s behalf giving an order to pay a particular amount to a particular person in a same city. Payment orders are not negotiable and even this thing is printed in words on the instrument. In pay order as well there is no chance of dishonoring as the amount is already paid hence pay order is also a pre-paid instrument. The validity of pay order is for 3 months from the day it has been issued. Pay orders are also known as banker’s cheque.

A pay order is always payable by the bank which issues it and they are applicable for payment in the same city. A pay order once made cannot be canceled if the other party is in a different city. These orders are usually acknowledged by the bank which gives a guarantee that the payment will be made.

Differences between Demand Draft and Pay Order

Both these instruments, i.e. demand draft and pay order are basically required or used for the same purpose but still are different to each other. The main differences between them are listed below:

1. Pay order also called Banker’s Cheque is a type of payment which gets cleared in the same branch of the bank which issued it where demand drafts are a mode of payment which gets cleared in any branch of the issuing bank.
2. In pay order, it is pre-printed that this instrument is non-negotiable whereas demand draft is a type of negotiable instrument. Basically a negotiable instrument is a type of document which guarantees the payment of a particular amount of money paid to one person from the other. It is a transferrable and signed document