A Guide to Travellers Cheques
Once a foreign currency staple, this form of prepaid funds has existed for hundreds of years, designed as a way to allow payment from one person to another across currencies. As the financial services sector continues to shift to online solutions, we look at how, where and why travellers cheques are used, as we discuss the relevance of this form of currency.
- What are travellers cheques?
- How do you use travellers cheques?
- Where can I get travellers cheques?
- Where can I use travellers cheques?
- How safe are travellers cheques?
- Travellers cheque vs. Cashiers cheque: What is the difference?
- What are the alternatives?
- Related content
What are travellers cheques?
The history of the travellers cheque spans as far back as 1772 when the first of its kind was issued by the London Credit Exchange Company, in the UK. Over the coming centuries the concept became popularised on a global scale, with major banks and financial institutions adopting this form of travel money in the 20th century. American Express became the largest issuer of travellers cheques and continues to offer these services to customers to this day.
A safe and convenient method of payment for anyone travelling to foreign territories, these pre-printed cheques hold a fixed amount which can be used worldwide across a range of currencies. Designed to facilitate payments from one person to another, using different currencies, travellers cheques were initially seen as a more practical way for individuals to carry their spending money.
Travellers cheques had their heyday in the late 20th century, reaching peak popularity in the mid-90s, before alternatives such as credit and debit cards became more widely available and easier to manage financial transactions. It was reported in 2018 that a mere 1.5% of Britons use travellers cheques, a rapid decrease over the course of two decades.
How do you use travellers cheques?
When you first receive your travellers cheques, you will be required to sign each one before use, as a way of verifying your signature. Each cheque will have a fixed value (usually $20, $50, $100, $500 etc.) as well as a unique serial number which can typically be found in the top right corner.
It is important to take note of these serial numbers as they will be referenced in any case of lost or stolen cheques. Unlike cash, if anything happens to your travellers cheques, the original vendor will be able to issue a refund for the exact same value. This added level of security is why this payment method was seen as revolutionary when first introduced.
As well as signing upon receipt, you will also need to sign each travellers cheque when used by a retailer or exchanged for cash. The act of signing your name as a form of security is somewhat outdated, given the modern technologies in place nowadays.
When accepted by retailers, a travellers cheque will be treated like local currency, which means you should receive any change in the standard, local currency.
Where can I get travellers cheques?
Due to dwindling demand, travellers cheques are not as readily available as they once were. However, they can still be acquired from some banks and financial institutions, post offices and currency exchange offices, like Travelex.
One thing to note is you may be required to settle the handling, commission or cash-in fees that often accompany travellers cheques, and these can be expensive, amounting to 2 – 3% in some cases. This cost is another reason they are no longer as frequently used.
Where can I use travellers cheques?
Generally, travellers cheques are still accepted all over the world, albeit harder to find vendors selling them and retailers accepting them as legal tender. Consider your destination before deciding on this form of travel money: if you are travelling to major cities there is more chance of you finding somewhere to cash your cheques or use them for in-store purchases. However, more remote destinations may not be equipped or able to accept this type of funds.
In light of the declining use of travellers cheques it might prove difficult to find places which accept them, depending on your destination. It is worth checking with your own bank before committing to a large sum of travellers cheques, as your bank can let you know if they offer more favourable alternatives. While we do not explicitly recommend relying solely on this type of travel money when heading overseas, if you need to use travellers cheques, be sure to research how and where to redeem them first.
How safe are travellers cheques?
The original blueprint for travellers cheques was a paper payment method which could be used as foreign currency but was more secure than handling cash. At the height of its popularity, travellers cheques were generally considered much safer than cash due to the added security of their unique serial numbers, meaning customers could cancel and replace cheques if need be. These numerical codes were a money-back guarantee for anyone whose cheques were misplaced, destroyed or stolen. Another added benefit, if your travellers cheques are intercepted, you will not be vulnerable to bank fraud, as they are in no way connected to your bank account, unlike credit or debit cards.
Financial security measures have evolved greatly since the inception of travellers cheques, however, with the introduction of PIN codes, two-factor authentication, fingerprint touch ID and facial recognition, to name a few forms of fintech security commonly available now. With this in mind, the concept of a travellers cheque no longer measures up in terms of fraud protection and data encryption.
Travellers cheque vs. Cashiers cheque: What is the difference?
In terms of appearance, a travellers cheque looks nearly identical to a standard issue cashier’s cheque: but are they similar in any other ways?
A cashiers cheque is issued by a bank or financial institution and is designed to be processed quickly, by the individual whose name is printed on the cheque. Conversely, a travellers cheque is for use overseas, is loaded with prepaid foreign currency – usually USD or GBP – and does not have a name or account number printed on it, although it does require a signature. Because travellers cheques do not have any bank details printed on them, they are deemed safer than cashiers cheques in terms of potential for fraudulent use. In addition to this, they are paid for when printed, meaning it is not possible for a travellers cheque to bounce.
What are the alternatives?
Credit or debit cards
If you are worried about travellers cheques not being widely accepted where you are going, then this form of travel money will offer more flexibility. Using your regular bank cards overseas provides a record of spending and offers maximum convenience, but there are also some frequently flagged concerns. Primarily these concerns focus on the sky-high fees and below-average exchange rates related to using your debit or credit card abroad. This isn’t always the case, however, as many banks and financial institutions offer travel credit cards, tailored to suit the needs of frequent flyers.
Travel money cards
Prepaid travel money cards are the modern equivalent to travellers cheques and have become very popular. This is largely due to the fact that they are totally separate from your regular bank account, allowing users to spend their balance freely without the worry of potential fraud or overspending. Preloaded with funds, travel money cards often help limit additional currency exchange charges. In addition to this, in spite of fluctuating currency rates, these cards let customers lock-in a favourable exchange rate ahead of time.
International bank accounts
If you are headed overseas for a sustained period of time, it could be more convenient and cost-effective to open a bank account in your destination country. You would be subject to the relevant security and eligibility checks but this decision pays off if you are making regular international money transfers or being paid in a different currency by foreign clients . Find out more about this option by reading our guide: How to Open a Bank Account Overseas.
Due to the growing alternative digital payment methods available nowadays, it seems this age-old travel money no longer measures up in terms of accessibility, cost and convenience. When travellers cheques were originally launched, ATM withdrawals were not commonplace for travellers, and digital point of sale systems had not been invented. Nowadays, it is easy to access local currency using an assortment of different payment methods such as debit or credit cards, travel money cards or money transfer apps.
The best option for anyone who is reluctant to use their debit or credit card overseas, would be to use a prepaid travel money card. Prepaid travel money cards are a safer and more widely used alternative to travellers cheques, and customers do not need to seek out a bank to use them, are not required to sign for each transaction and security measures in place are far more advanced. This method enables customers to secure multiple foreign currencies, locking in the optimum exchange rate for your currency pairing ahead of your trip abroad. Use our comparison tool to ensure you receive the most competitive exchange rates for your international money needs.
About Cornerstone As a cloud-based provider of international payments, currency risk management and digital account services, Cornerstone Group are distinctly different from other competitors in the money transfer market. Founded in London’s financial district in 2010, Cornerstone created an online cloud-based technology, designed to facilitate foreign exchange and cross-border payments. By harnessing the processes of […]
What is the Google Pay app? A culmination of Android Pay and Google Wallet, the Google Pay app officially entered the FinTech market in 2018. Originally an enterprise devised to be a digital mobile wallet, the Android equivalent to Apple Pay and Samsung Pay. The app has since been optimised for use on both iOS […]
Travellers’ cheques – what you need to know
You would be forgiven for thinking travellers’ cheques have been consigned to history, much like the old-fashioned cheque book. But while they might have largely been superseded by more flexible payment methods, they could still come in handy for some travellers.
What are travellers’ cheques?
Put simply, travellers’ cheques are pre-written cheques for a fixed amount. You can exchange them for cash while you are away or use them to pay for items directly.
You can choose to have them in sterling or in the currency of the country you are travelling to.
How do travellers’ cheques work?
As soon as you buy travellers’ cheques you need to sign them. This is usually in the top left hand corner. You also need to make a note of their serial number.
This will provide your proof of purchase and will come in handy should they need replacing at some point.
You’ll need to sign your travellers’ cheques again when you spend them. Whoever is accepting the travellers’ cheques will need to ensure the two signatures match to verify that you are their true owner.
You might be able to spend travellers’ cheques directly in hotels, restaurants and shops, or you can exchange them for cash at a bank or bureau de change.
Benefits of travellers’ cheques
Although travellers’ cheques may now seem a little old-fashioned, the main reason people keep using them is that they are a safe and secure way of carrying money overseas.
If you do lose them or they are stolen, they are easy to replace. You just need to make sure you have a note of the serial numbers and store those details away from the cheques.
They also don’t have any expiry dates, so if you don’t spend them you can save them for your next trip or take them back to the place you bought them and request a refund.
Disadvantages of travellers’ cheques
The main downside of travellers’ cheques is that they can be a bit of a faff.
While you might be able to spend them like cash in some places, in other – less touristy locations – you may have to make a trip to the bank or bureau de change and queue up to get your cash.
There are also costs associated with travellers’ cheques. You may have to pay a commission and a handling fee. You could also be charged a fee when you cash them in.
Costs are likely to be higher if you buy sterling travellers’ cheques and convert to local currency at your destination.
Where can I buy travellers’ cheques?
You can buy travellers’ cheques in the UK from banks, the Post Office, Bureaux De Change as well as travel agents.
Where can I use travellers’ cheques?
Where you can spend your travellers’ cheques depends on where you are travelling.
In tourist destinations and larger cities you might be able to spend them like cash in hotels, restaurants and shops and receive your change in local currency. In more rural locations you might struggle.
Retailers in the US also often accept travellers cheques.
If you cannot spend them like cash you will need to exchange them for local currency in a bank or bureau de change.
What do I do if my travellers cheques are lost or stolen?
Much of the remaining appeal for travellers cheques comes from the fact that you won’t be left out of pocket if they are lost or stolen.
You’ll need to contact the customer services centre for the company that issued the travellers’ cheques and provide them with the relevant serial numbers. You’ll then be able to get a refund or replacements.
Again this is why it is vital to keep a note of the serial numbers on all your travellers’ cheques and store them separately.
Are travellers’ cheques worth it?
Whether or not travellers’ cheques are worth it for you will depend on two things:
- Your need for safety and security – travellers’ cheques are easy to replace if lost or stolen and cannot be used without your signature
- How easy they will be to spend or exchange at your destination
If you are travelling to somewhere like the US, or to a popular tourist destination, where they can easily be spent and exchanged and you worry about carrying cash or credit cards, they could be a good option.
However, if you are confident carrying around other payment methods, like credit cards, debit cards and prepaid cards, you might find they give you an administrative headache, particularly if you aren’t in a big city or tourist hotspot.
What are the alternatives to travellers’ cheques?
If you don’t fancy carrying around lots of cash, or a fistful of travellers’ cheques there are plenty of alternatives.
The cost of using debit cards and credit cards overseas has fallen since the heyday of travellers’ cheques. In fact you can now get travel credit cards that are specifically designed for use overseas, with lower fees.
When you spend on a credit card overseas, you also have the added benefit of Section 75 of the Consumer Credit Act. This means that any purchase you make on it (from £100-£30,000) is protected by your credit card company.
Credit and debit cards may be less secure than travellers’ cheques but they do make it a lot easier to spend your holiday money.
Another popular option is to use prepaid cards. Here you load money from your bank account onto a card that you can then use to pay for goods and services like any other card in your wallet.
It’s also worth remembering that if you do lose or have cash stolen from you on holiday you may be able to claim for the loss with your travel insurance policy. Check the terms of your plan but you can typically claim for £300, rising to £500 with some insurers.
Pros and cons of using travelers checks when going abroad
When traveling abroad, it’s important that you are able to buy the goods and services you need with as few hurdles as possible.
- Paper-based money is accepted at most places, but it could lose value every time you exchange it. While there may be ATMs available that allow you to take out small amounts of cash each day, you could be charged withdrawal fees, especially if the bank is not your own. In addition, you run the risk of your cash being lost or stolen.
- Although using a credit card when traveling abroad is a popular option, not all merchants accept plastic. Those that do might only take chip cards. However, credit cards do have more of an advantage when it comes to fraud protection and liability coverage.
In between these two payment options are travelers checks (a.k.a. cheques). Although not ideal in all circumstances, travelers checks can offer some important benefits. Before diving into the pros and cons of travelers checks, it’s important to understand what they are and how they work.
What is a travelers check?
Travelers checks are a medium of exchange designed for the express purpose of foreign travel. Prior to an upcoming trip, would-be travelers can visit a local bank, AAA, or travel agency to purchase these checks, with most travelers check denominations ranging from $20 at the lower end to $1,000 at the higher end.
Once abroad, you can either:
- Use these checks to make purchases at participating hotels or retail stores
- Exchange your checks for cash in the local currency at participating banks or check cashing agencies
Because every check carries a unique serial number, they’re insured against theft and loss. If a traveler loses a check, the original bank can cancel it and issue a replacement to be picked up at a local bank or travel agency in the destination country.
Advantages of travelers checks
One of the main advantages of using travelers checks is that they are easy to cancel or replace. If your wallet is stolen, you can receive replacement checks — provided that you still have the serial numbers of the missing ones.
This is in sharp contrast to cash, because when it’s gone…it’s gone, and credit cards can be difficult to replace when overseas.
Another advantage is that travelers checks are indirectly accepted everywhere. Simply convert your check into cash, and you now have enough local currency to buy whatever you need.
Travelers checks may also carry lower fees than credit cards do — but be prepared to pay slightly higher exchange rates.
Challenges of using travelers checks
One of the main challenges of using travelers checks could be the ability to exchange them. This might not seem like a big deal as you’re preparing for your trip, but imagine landing in a foreign city late at night and not being able to exchange your travelers checks into usable cash.
Despite the time of day you arrive, travelers checks aren’t accepted everywhere. Many smaller towns may not have services that can convert checks into money.
Another challenge is keeping track of all of the serial numbers of each check in the event that you need to cancel or replace them. It’s important you keep those numbers separate from your wallet. While this may not be a deal breaker for you, it’s definitely something to consider as you plan your trip.
Travelers checks typically carry less competitive exchange rates than what credit cards offer. It can be difficult to determine the best amount for each stop, so consider requesting travelers checks in the smallest denominations possible.
Are travelers checks right for your trip?
While travelers checks may not seem practical — especially at a time when ATMs and credit card terminals are so popular worldwide — they can provide additional insurance against the loss or theft of other payment types.
Since travelers checks don’t expire, whatever amount you don’t use can be exchanged for US dollars at your local bank when you return home. Once you know how to use travelers checks safely and correctly, there’s no reason not to have a few on-hand for your next trip.