Cheque vs. Promissory Note

What's the Difference?

Cheque and promissory note are both financial instruments used for making payments or borrowing money. However, they differ in terms of their nature and usage. A cheque is an order issued by an account holder to their bank, instructing them to pay a specific amount of money to the person or organization named on the cheque. It is primarily used for making payments and is considered a negotiable instrument. On the other hand, a promissory note is a written promise made by one party to another, stating that a specific amount of money will be paid on a specified date or upon demand. It is commonly used for borrowing money and serves as evidence of a debt. While both cheque and promissory note involve financial transactions, they have distinct characteristics and purposes.


AttributeChequePromissory Note
DefinitionA written order to pay a specific amount of money from one person's account to another person or organization.A written promise to pay a specific amount of money to another person or organization at a future date.
Legal StatusLegally recognized as a negotiable instrument.Legally recognized as a negotiable instrument.
Payment MethodUsually used for direct payment from one bank account to another.Can be used for direct payment or as a guarantee of payment.
Issued ByDrawn by the account holder or authorized signatory.Created and signed by the debtor or borrower.
PayeeThe person or organization to whom the payment is made.The person or organization who will receive the payment.
Bank InvolvementRequires a bank to process and transfer funds.May involve a bank for processing and collection of funds.
Payment DateCan be post-dated or presented for immediate payment.Usually has a specific future payment date.
GuaranteeDoes not provide a guarantee of payment.Provides a guarantee of payment by the issuer.

Further Detail


When it comes to financial transactions, there are various instruments that individuals and businesses can use to facilitate payments and borrowings. Two commonly used instruments are cheques and promissory notes. While both serve similar purposes, they have distinct attributes that set them apart. In this article, we will explore the characteristics of cheques and promissory notes, highlighting their similarities and differences.


A cheque is a negotiable instrument that allows the transfer of funds from one person or entity to another. It is typically issued by an individual or a business and drawn on a bank account. Cheques are widely used for various purposes, including payment of bills, salaries, and business transactions.

Here are some key attributes of cheques:

  • Payment Order: A cheque serves as a payment order, instructing the bank to pay a specific amount of money to the person or entity named as the payee.
  • Drawer: The person or entity who writes the cheque and issues it is known as the drawer.
  • Drawee: The bank on which the cheque is drawn is referred to as the drawee.
  • Payee: The individual or entity to whom the payment is made is called the payee.
  • Bank Account Requirement: To issue a cheque, the drawer must have a bank account with sufficient funds to cover the amount mentioned on the cheque.

Promissory Note

A promissory note is a written promise to pay a specific sum of money to a designated person or entity at a specified time or on-demand. It is a legally binding document that outlines the terms and conditions of the loan or debt. Promissory notes are commonly used in various financial transactions, such as loans, mortgages, and business agreements.

Here are some key attributes of promissory notes:

  • Promissory Promise: A promissory note represents a promise made by the borrower to repay the lender a specific amount of money within a defined timeframe.
  • Borrower: The person or entity who borrows the money and makes the promise to repay is known as the borrower or maker of the note.
  • Lender: The individual or entity who lends the money and receives the promise of repayment is referred to as the lender or payee of the note.
  • Terms and Conditions: Promissory notes include detailed terms and conditions, such as the principal amount, interest rate, repayment schedule, and any other relevant provisions.
  • Legal Enforceability: Promissory notes are legally enforceable documents, providing a legal recourse to the lender in case of default or non-payment.


While cheques and promissory notes share some similarities in terms of their purpose and usage, they differ in several aspects:

1. Nature of Instrument

A cheque is an order to pay, while a promissory note is a promise to pay. A cheque instructs the bank to transfer funds from the drawer's account to the payee, whereas a promissory note represents a commitment by the borrower to repay the lender.

2. Parties Involved

In a cheque transaction, there are typically three parties involved: the drawer, the drawee (bank), and the payee. On the other hand, a promissory note involves two parties: the borrower (maker) and the lender (payee).

3. Bank Account Requirement

To issue a cheque, the drawer must have a bank account with sufficient funds. In contrast, a promissory note does not require a bank account, as it represents a direct promise to repay the lender.

4. Legal Enforceability

While both cheques and promissory notes are legally enforceable, the process and requirements for enforcement may differ. Cheques are subject to specific banking regulations and can be dishonored if there are insufficient funds or other issues. Promissory notes, on the other hand, can be enforced through legal action, including filing a lawsuit against the borrower.

5. Usage and Acceptance

Cheques are widely accepted as a form of payment, and their usage is prevalent in various financial transactions. Promissory notes, on the other hand, are primarily used in loan agreements and other formal borrowing arrangements.

6. Transferability

Cheques are generally transferable, allowing the payee to endorse the cheque to another party. This enables the payee to use the cheque as a means of payment to someone else. Promissory notes, however, are typically non-transferable unless explicitly stated otherwise.

7. Timeframe

Cheques are usually payable on demand, meaning they can be cashed or deposited immediately. Promissory notes, on the other hand, often have a specific maturity date or repayment schedule, indicating when the borrower is obligated to repay the lender.


In summary, cheques and promissory notes are both important financial instruments used for payments and borrowings. While cheques serve as payment orders drawn on a bank account, promissory notes represent a promise to repay a specific amount of money. They differ in terms of parties involved, bank account requirements, legal enforceability, usage, transferability, and timeframe. Understanding the attributes of cheques and promissory notes is crucial for individuals and businesses to choose the appropriate instrument for their specific financial needs.

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