WHAT ARE THE TYPES OF MONEY?


                                                                                                   
Meaning: -just think a world without money. And you would definitely say is impossible to live without it. This is because; we need money to pay for everything we need. Following are the two contradictory(opposing) statements by two great personalities of our times.

“Money is the root cause of evil”. “Lack of money is all evil”

Over the times money evolved in different forms. In olden days, commodity money was used, and now people mostly use currency notes and coins and bank money.

The types of money are as follows:

1.      Commodity Money: -In ancient times, commodity money was used as a medium of exchange. For instance, food grains, cattle, animal skins, etc., were used as commodity money. However, commodity money has certain limitation such as
·         Certain commodities such as cattle were not divisible.
·         Certain commodities like food grains were perishable. Etc..

2.      Metallic money: -To overcome the limitation of commodity money, metallic coins were introduced, metallic coins of gold, silver, copper, etc., were accepted as medium of exchange.matallic money can be of two types
·         Full Bodied or Standard coins: -In standard coins, the face value of coin is equal to the value of metal content of which it is made.
·         Token Coins: -In token coins, the face value is greater than the value of metal content of which it is made. In India, all coins which are circulation are token coins.

3.      Paper Money: - The growth of trade and development all over the world led to considerable increase in demand for money. The metals such as gold and silver were in short supply. Also it was difficult to carry and count metal coins, especially for large transactions. There fore, paper money came into existence.

4.      Representatives Paper Money: - The representative paper currency notes are backed by 100% metallic reserves (gold and Silver) with the central bank.
·         Convertible paper money: -It is that money which can be converted into standard money on demand. This money normally backed by gold or silver reserves. Therefore it can be converted into gold and silver. Now a day’s Convertible paper money is not in use.
·         Inconvertible Paper Money: -It is also known as Fiat money. They are sanctioned on the command of Government. This money is not backed by gold or silver reserves. Therefore it cannot be converted into gold or silver. Now a day Inconvertible Paper Money is in use in almost all countries.

5.      Bank/Credit Money: -
·         It is also called as Credit money
·   The money that is based on the promise of the bank to pay is called bank money.
·      The bank deposits kept by the people with banks which are payable on the demand are included in this type of money. Cheques, Bank drafts, Traveller’s cheque, Credit cards, are the instruments of bank money

Credit Cards: -A new concept of credit money is gaining popularity, i.e. credit cards, issued by private business firms and by banks. Now day’s credit cards become extremely popular. These cards are used to buy goods and make payments. Credit cards are valid not only at national level but also at international level.

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