5 Stages of Evolution of Money (2024)

Some of the major stages through which money has evolved are as follows: (i) Commodity Money (ii) Metallic Money (iii) Paper Money (iv) Credit Money (v) Plastic Money.

Money has evolved through different stages according to the time, place and circ*mstances.

(i) Commodity Money:

In the earliest period of human civilization, any commodity that was generally demanded and chosen by common consent was used as money.

Goods like furs, skins, salt, rice, wheat, utensils, weapons etc. were commonly used as money. Such exchange of goods for goods was known as ‘Barter Exchange’.

(ii) Metallic Money:

With progress of human civilization, commodity money changed into metallic money. Metals like gold, silver, copper, etc. were used as they could be easily handled and their quantity can be easily ascertained. It was the main form of money throughout the major portion of recorded history.

(iii) Paper Money:

It was found inconvenient as well as dangerous to carry gold and silver coins from place to place. So, invention of paper money marked a very important stage in the development of money. Paper money is regulated and controlled by Central bank of the country (RBI in India). At present, a very large part of money consists mainly of currency notes or paper money issued by the central bank.

(iv) Credit Money:

Emergence of credit money took place almost side by side with that of paper money. People keep a part of their cash as deposits with banks, which they can withdraw at their convenience through cheques. The cheque (known as credit money or bank money), itself, is not money, but it performs the same functions as money.

(v) Plastic Money:

The latest type of money is plastic money in the form of Credit cards and Debit cards. They aim at removing the need for carrying cash to make transactions.