Types of Money

All about your Money Honey… Part 3

In continuation to Money, its functions, characteristics & importance, now let us know the types of Money.

Commodity Money:  It is something that performs the function of money and has alternative, non-monetary uses. Money that has an alternative use as a commodity–cattle, gems, and tobacco, for example– is considered commodity money.

Examples:  Gold, Silver, Cigarettes

Fiat Money:  It is something that serves as money but has no other important uses. The paper money is generally called as the fiat money. Fiat Money has a face value determined through
government order and is therefore legal tender.

Examples:  Coins, Currency, Check deposits

Representative Money: It is backedby, or exchangeable for, a valuable item. Money that is backed by–or can be exchanged for–gold or silver is known as representative money.

Fiduciary Money: It is based on transferable promises by bank to pay. Eg., Bank Notes, Checks

Money and Near Moneys

# Currency—Coins and bills (notes). 

# Checks or checking accounts which offer checkable deposits.

# Credit cards are not really money; they are representative of future claims to funds. Credit cards actually defer the completion of the transaction to a later date.

# Debit cards are similar to checks, but the withdrawal is done electronically.

Near moneys are assets that have values stated in terms of money, but are not themselves money.

Near money can easily be turned into money, such as savings accounts or time deposits.

Categories: Key Differences, Money Basics, Money Management, Tutorials, Types of Money