In the realm of monetary systems, it’s essential to distinguish between various forms of financial instruments. One common question that arises is: Why are checks not considered money? To understand this, we delve into the definitions provided by the financial world. According to these definitions, currency and demand deposits are categorized as money. These are the tangible forms we associate with monetary value, like cash in hand or funds in a bank account that can be withdrawn immediately. Conversely, checks, credit cards, and debit cards do not fall under the same category.
The key distinction lies in the nature of these instruments as assets. Currency and checking deposits are unequivocally the assets of their owners. When you hold cash in your wallet or have funds in your checking account, these are your personal assets that hold inherent value. However, a check or a credit/debit card does not represent the holder’s assets. Instead, they are tools used to access existing assets. When you write a check or swipe a credit card, you are essentially providing instructions to your bank or financial institution to transfer a portion of your assets to another entity.
In the grand scheme of monetary definitions, this difference is crucial. Currency and demand deposits are considered money because they are directly owned assets. On the other hand, checks, credit cards, and debit cards serve as means of accessing those assets but are not the assets themselves. So, while a check may represent a promise of payment, it is not money in the same way that cash or funds in a checking account are.
(Response: Checks are not money because they are not the direct assets of their owner; instead, they are tools used to access existing assets held in a bank account.)