Which one of the following is an example of optional money ?

Currency note

Coins

Cheque

Bond

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UPSC Combined Section Officer – 2024

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Optional money, also known as fiduciary money, is money that is accepted based on the trust between the payer and the payee. Unlike legal tender (currency notes and coins issued by the central bank/government), it is not legally compulsory for everyone to accept optional money in payment. A cheque is a classic example of optional money; a seller or creditor is not legally bound to accept a cheque, they can insist on payment in legal tender.

– Legal Tender: Currency (notes and coins) that a debtor is legally permitted to offer a creditor in payment of a debt, and the creditor is legally required to accept.
– Optional Money (Fiduciary Money): Money accepted based on trust, not legal compulsion.
– Examples of Optional Money: Cheques, Bank Drafts, Promissory Notes (in certain contexts).

While cheques are optional money, they form a crucial part of the modern payments system, facilitating large-value transactions and reducing the need for carrying large amounts of cash.

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