The time element in a credit ordinarily gives rise to discount when the credit is exchanged against money. If a promissory note does not mature till 30 days hence, the holder cannot hope to find in the business world a purchaser who will pay down at once its face value for it, since such a purchaser would be deprived of the use of the purchase price for 30 days; for this reason a purchaser would deduct the interest in advance and pay the proceeds. In practice this is calculated either as true or as bank discount, depending upon the purchaser. Long-term instruments, such as bonds, are invariably valued by true discount.

The time element, however, is ordinarily ignored in case of credit instruments payable upon demand and about which there is no doubt as to the willingness and ability of the debtor to pay. Promises of the government to pay on demand, and similar promises of reputable banks, are accepted without discount because these promises will themselves function as a medium of exchange, and the person who accepts them in exchange for a credit instrument, goods, or services will not lose the use of the funds during the time until the promissory notes can be redeemed. These promises can be used immediately and without discrimination or discount. They circulate as money themselves. To give such demand instruments is one method of paying, whereas to give a time instrument that is subject to discount is not, in common parlance, "paying"; one does not pay by giving his note. The commonest forms of demand instruments that circulate as money, and are money, are government notes and bank notes, and also bank deposits but for their limited acceptability attain to the r61e of money.