DEFINITION of 'Banknote'

A negotiable promissory note issued by a bank and payable to the bearer on demand. The amount payable is stated on the face of the note. Banknotes are considered legal tender, and, along with coins, make up the bearer forms of all modern money.

Also known as a "bill" or a "note."


Originally, objects such as gold and silver were used to pay for goods and services. Eventually, they were replaced by paper money and coins that were backed by precious metals.

Currently, banknotes are backed only by the government. Although in earlier times commercial banks could issue banknotes, the Federal Reserve Bank is now the only bank in the United States that can create banknotes.

  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Promissory Note

    A financial instrument that contains a written promise by one ...
  3. IOU

    An informal document that acknowledges a debt owed. IOU is an ...
  4. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  5. Note

    A financial security that generally has a longer term than a ...
  6. Treasury Note

    A marketable U.S. government debt security with a fixed interest ...
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