What Is the Difference Between a Bank Note & Currency?

Pen writing on cheque.
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Although the United States has one type of currency note as of 2014, it used to have several. Both national bank notes and federal bank notes were commodity-backed currencies for a period of time. Although bank notes still exist, they are no longer considered currency. Instead, they are promissory notes, or negotiable instruments that are payable on demand.


National Bank Notes

A national bank note is a type of promissory note made by a bank that is payable on demand to the bearer. Before the United States issued currency notes, national banks issued bank notes. Bank notes were backed by a commodity like gold or silver. They could be redeemed domestically or internationally at an exchange rate, similar to how international currencies are exchanged today.


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Federal Reserve Bank Notes

For a brief period of time, the Federal Reserve also issued bank notes. These bank notes were authorized in 1913 and are no longer in existence. Because a new banking system was being introduced, the Federal Reserve issued these bank notes to avoid any contractions in money supply. Since no contraction occurred, Congress repealed the issuance of these notes in 1945.



Currency is a form of money that is legally designated by a governing body as tender. Currency can be hard money like coins, or paper money like dollars and euros. The current currency of United States dollars is also referred to as Federal Reserve notes. Historically, national and Federal Reserve bank notes were considered a type of U.S. currency along with gold certificates, silver certificates, United States notes and Federal Reserve notes. As part of a move towards a fiat currency, the U.S. government consolidated all notes to the current currency backed by the Federal Reserve.


Bank Notes Today

Even though Federal Reserve bank notes are no longer in production, the concept has not entirely disappeared. Many banks still issue national bank notes, although they are not considered currency. Instead, bank notes are now considered a type of negotiable promissory note. Banks notes are similar to bank certificates of deposits and bonds in the sense that they are cash equivalents and ownership can be transferred.