Cheque And Promissory Note

Carrying cash to make and receive payments for goods and services is not only impractical but also risky. Though it is easier to make payments through cash and credit cards in daily life, negotiable instruments are preferred by people in place of cash in business. In businesses there are several payments made in a day and it is not possible to make use of cash all the time. In this article we will talk about cheques and promissory notes that are two of these negotiable instruments. Though serving similar purposes, there are many differences between a cheque and a promissory note that will be clear after reading this article.


All of us are aware of cheques as they have become very common place and a safe mode of transfer of money. We receive payment from our employers through cheques that we deposit in our current account and the money gets added in our account. In businesses, we have to pay to suppliers when the due date of their invoice arrives. They can present the cheque in the bank that will credit their account by the amount mentioned by us and debit our account by the same amount. Cheques are a very convenient mode of payment that obliterates the need of cash in any business. They are documents issued to a bank that entitle the person whose name they bear to claim the amount mentioned in them.

Promissory Note

To understand promissory note, let us take an example. If you have taken a loan of $1000 from your friend Matt, you can assure him of safety of his money by issuing a document saying that you will pay the money to Matt or the bearer of the document after a date that is mentioned on the document. This document, duly signed by you and having a stamp affixed on it is called a promissory note as it contains a promise made by you to matt that you will return the money after a specified period of time.

What is the difference between Cheque and Promissory Note?

• While a cheque is a one time payment, a promissory note is a promise made to pay back a loan; either in installments or in one go at a later date.

• Cheque is drawn on a bank whereas promissory note can be made by any individual in favor of another person.

• In case of a promissory note there are two parties called the maker and the payee, whereas in case of a cheque there are three parties, the drawer, the drawee, and the payer.

• Cheque can be drawn in favor of oneself but a promissory note is always made in favor of another person.

• Cheques can be conditional but this is never a case with promissory notes

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