1.4 Methods of Payment

There are three types of money: commodity, fiat, and cryptocurrency. Commodity money has intrinsic value. Commodities are items such as gold, silver, silk, salt, corn, and so on. For a commodity to be usable as money, it must be used by most people in an economy, made into standardized quantities, durable, easily transportable, and divisible into smaller units. Fiat money, on the other hand, gets its value from government decree. This is the type of money used most commonly today. The third type of money is cryptocurrency (crypto). However, not all cryptocurrencies can be considered money. For a crypto to be considered money, it must be exchangeable for some good or service, and not all cryptos are.

Another common method of payment is a check. Historically, paper checks were used frequently, even daily, by consumers. A check instructs the bank to take funds from your account and transfer them to another account. Since the move to electronic banking, few consumers use paper checks anymore.

In lieu of paper checks, there are several forms of electronic payment options. Frequently used methods include credit cards, debit cards, direct electronic bank transfers (automated clearing house transactions, or ACH), and wires. Most business and personal transactions in the modern world are accomplished through one of these electronic methods. All of these types of transactions move funds directly from one account to another.