Fiat Money defers to that money which is issued by order/authority of the government. It includes all notes and coins which the people in a country are legally bound to accept.
Bank Money consists of optional money which may or may not be accepted in the discharge of debts. Bank money represents claims on deposits left with banks. People keep part of their cash as deposits with banks which they can withdraw anytime they like or transfer to some one else.
Examples—cheques, bank drafts, credit cards etc.
Two primary functions of money:
