Bills of credit

Bills of credit are documents similar to banknotes issued by a government that represent a government's indebtedness to the holder. They are typically designed to circulate as currency or currency substitutes. Bills of credit are mentioned in Article One, Section 10, Clause One (also known as the Contract Clause) of the United States Constitution, where their issuance by state governments is prohibited.

Legal writers, as opposed to economic historians, incorrectly assume that the constitutional phrase "Bills of Credit" was simply a synonym for paper money, but it refers to only one, though a very important, type of paper currency.