Difference between cheques and promissory note


We use cheques and Promissory notes in our normal course of life. Promissory notes and cheques are a type of Negotiable Instrument used in day-to-day transactions. Using cash while doing all the transactions usually becomes risky and problematic. Negotiable Instruments like cheques and promissory notes were used to neglect these situations. These documents guarantee that the holder will receive the required payment within the desired period.

Carrying cash to do payments for goods and services is unusable and risky. Creating and doing payments by cash and credit cards in daily life is easier. People in their daily life use Negotiable instruments like promissory notes and cheques. In normal life, we all do lots of transactions, be it in business or our casual life, and it is not convenient to use cash in all transactions. In this article, we will discuss what Promissory notes and cheques are and what is different between these two.

Promissory Note: An Introduction

A promissory Note is a lawful paper in which a person promises to pay money to another person in the future. The date of payment can be immediate or in the future, which will be specified in the document. The promissory note includes the money one has to pay with the name of the payee and holder, date of maturity, and signature.

Once the payee gets the required cash, the contract is withdrawn and returned to the plant. While the bank may give minors (below 18 years of age) people loans, you may be needed to sign a promissory note. It allows firms and people to obtain money from sources other than banks. According to the indicated terms, this payee will be an individual or company to carry the promissory note. The instruction of these notes allows anybody to act as a holder.

Parties involved:

There are usually three parties involved in a Promissory note: 

  1. Drawee: Drawee is a person to whom the promise has been made or in whose favor the promissory note is drawn is called drawee or promise.
  2. Drawer: A drawer, also known as promisor or maker, is a person who creates the written oath to pay the fund on a specific date or the order by the drawee. 
  3. Payee: A payee refers to the third party in the process. The drawee and payee are the same individuals to whom the fund is paid.

Features of Promissory Notes:

Listed below are the parties involved in the process:

  • The promissory note must be made in written form.
  • The promissory note should have an absolute promise to pay.
  • The amount paid should be specific.
  • The issuer must sign it.
  • It should be paid to a specific person.
  • The promissory notes must be stamped suitably.

Cheque: An Introduction:

A cheque is a charge to get the amount from a bank account. For using a cheque, it should express the following:

  • Name of the payee
  • The amount needed to be paid
  • The required date. 

A cheque is among the most ordinary transactions, as it can reduce the burden of using cash. However, due to digitalization and online banking, cheque has not been commonly used in the past decade.

A cheque is generally written to allow, say, a sum of the amount to a person who is a payee. Yet, a cheque may be written in cash, which means that the bank will make payment to whoever gives the cheque. 

A cheque has several security features that make it harder for a forger to alter the details already said on the legal papers.

Parties Involved:

Listed below are the parties involved in the process:

  • Payee: Payee is the one who is named in the cheque to get the payment.

  • Drawer: The drawer is the one who creates the cheque and can be the account holder or the client. In some cases, the drawer and payee can be one.

  • Drawee: Drawee is a financial institution (bank) on which the cheque has been marked.

  • Endorser: Once the payee transfers the fund, the right to take the transaction to another one is known as an endorser.

  • Endorsee: When the payee transmits the right to take the transaction to another one, the one to whom the right is paid is known as the endorsee.

Features of Cheque:

  • Cheques can be given for current or savings accounts.
  • It is marked on a certain banker.
  • A cheque is a total order.
  • The hier of a cheque is set and specific and cannot be altered.
  • The transaction will be done only in the name of the holder/hier.
  • A cheque is a tool that is owed on demand.

Difference between Cheque and Promissory Notes

We do transactions, personal or business, in our day-to-day life. Most of the time, we carry cash with us. But at certain times, cash transaction bears the risk. Individuals seek negotiable tools such as cheques or promissory notes to secure payment. But unfortunately, people need to understand what cheques and promissory notes are and how we use them. 

The cause after that is they need an ideal concept for a cheque or promissory note. Due to this, they make a mistake that can put them in a problematic situation with many reactions. To avoid the reactions, everyone must understand the distinction between them.



Promissory Notes


By cheque, a person orders the bank to send the fund to the bank account of another person by whose name the cheque is made.

A promissory note is a tool made in writing way with an open contract to pay a specific fund of the amount to a specific person or the agency's bearer and marked by its creator.


A cheque is stated in section 6 of the NI act 1881

A promissory note is stated in section 4 of the NI Act 1881.

Parties Involved

Three parties are involved in the case of a cheque.

Two parties are involved in the case of a promissory note.


The drawer of the instrument of the cheque is Creditor

The drawer of the instrument of the promissory notes is Debtor


The cheque is paid as on the demand.

The Promissory note is paid on the specific time period to the one listed there.

Grace Period

There is no grace period in the case of a Cheque.

Three days of grace period is given for promissory notes

Notice of Dishonour

For a cheque, it is not necessary to have a notice of dishonor. 

In the case of a Promissory note, no notice of dishonor is there.



In the case of a cheque, the parties stay liable to pay even if no notice of dishonor is provided. 

For promissory notes, the liability of the drawer is prior and final.

Validity of these instruments

A cheque is normally valid for the time of six months; certain cheques made by the nation can be valid for three months, counting from its issued dates.


A promissory note is valid for three months, counting from the date it is issued. After that, it will become invalid.

Acceptance of the instrument

A cheque doesn't need acceptance, and its entity is for a quick transaction.

For a Promissory note, no acceptance is needed from the drawee.


Except in some specific cases, no stamp is needed in case of a cheque

It is compulsory to have a stamp on the promissory notes.

Security and Dishonour

A cheque bounce notice is given when the cheque is returned due to insufficient funds, mismatched signature, overwriting, etc., and the holder can ask for the payment of the amount of the cheque. Yet, if the cheque is bounced due to inadequate funds in the account, then notice is given as on Section 138 of the NI Act within a time of 30 days of a notice given by the Financial Institution, that is, a bank. 

After fifteen days of the issue, the holder can start legal moves under Section 138 of the NI Act 1881, and the bouncing of a cheque is said to be a criminal offense that can be punished by jail for not more than two years or a fine that can be double than that of the cheque amount.

Promissory notes are tied by a part of a property or other real acquisition that can be retrieved if the payer does not make the payment on their terms. A person must also check the proof of the limitations time and file a case at a specific time under the Act 1963.

Types of instruments

Listed below are some types of cheques:

  • Order cheque

  • Bearer cheque

  • Open cheque

  • Traveler’s cheque

  • Self-cheque

  • Crossed cheque

  • Banker’s cheque

  • Post-dated cheque

Listed below are some types of Promissory notes:

  • Investment promissory note 

  • Real estate promissory note

  • Commercial promissory note

  • Person promissory note

Before using any of the Negotiable tools, be it Cheque or promissory note. One must need to understand the distinction between both of them to get a clear idea and to avoid being in financial trouble. If a person comes to be efficient about the element and the way it works, we can use any of these instruments per the needs.

Summary of differences between Cheque and Promissory notes.

  • In the cheque, we made installments at one time. Whereas promissory notes, a person can make payment at one time or in installments on a future decided date.
  • A cheque may be made conditional. Whereas, A promissory note can never be conditional
  • Three parties are involved in Cheque, whereas two are involved in the Promissory note.
  • A cheque is marked on a bank, whereas any person can make a Promissory Note in turn of their creditor.
  • Acceptance of the payee is needed before creating the Cheque in written form. Acceptance is not needed in the case of a promissory note.
  • No grace period is needed for cheques, whereas three grace days are allowed for Promissory notes.
  • A cheque can be crossed, but the promissory notes can not be crossed.
  • A cheque doesn't need any stamp, Whereas, in the case of Promissory notes, a stamp is a must.


Things we discussed above explain that Negotiable instruments are records used for transactions. These tools play a main role in doing transactions globally. We can use these tools for the global exchange of money and services. These tools are in noted form. If a person doesn't do the payment, the one to whom the payment is to be done can sue another one by whom the payment must be done.

Negotiable instruments, including promissory notes, bills of exchange, and cheques, are written agreements whose help can be given from the actual holder to a new holder, as these are legal papers that vow payment to the assignee or a defined person. 

The use of these is that the holder claims the funds and can use them as per their needs, and once the money/funds are assigned, the holder of such gains full legal title to such instrument.

In previous years, there has been an electronic change in banking in India, but these are still used throughout the globe. Their presence counts on people overcoming the issue faced due to online banking, but eventually, they may need to be updated in the future.


What refers to a promissory note?

A legal, monetary instrument said by a person vowing another person to pay the fund on a specific day is known as a promissory note.

Define the two kinds of promissory notes.

  • Promissory notes are divided into two types: Unsecured Promissory notes and Unsecured Promissory notes.
  • Secured promissory notes have collateral after them to ensure the loan. 
  • Unsecured notes can have private security but no useful collateral, which has a great risk of monetary loss.

What are some kinds of cheques?

There are certain types of cheques, such as:

  • Cashier's checks
  • Pay-checks.
  • Certified checks

Do we have to write our full name on the cheque?

The name on the cheque should be similar to that of the name of your account and have your initial or first name with your surname.

Where is the MICR number visible on the cheque?

The MICR number is normally visible at the end of the cheque. Yet, this can also depend from bank to bank.

What refers to a cheque number?

A cheque number is a special number listed on each cheque. The cheque number consists of six digits.

At what time does a bank have a right to deny making a transaction?

  • Where the date on the cheque isn't marked.
  • When a post-dated cheque is given.
  • If six months have passed, counting from the date of issue.