What is a 'Traveler's Check'

A traveler's check is a medium of exchange utilized as an alternative to hard currency. Travelers often used traveler's checks on vacation to foreign countries. In 1891, American Express first introduced the checks. Traveler's checks offer a safe way to take currency overseas. The issuing party, usually a bank, provides security against lost or stolen checks.

BREAKING DOWN 'Traveler's Check'

A traveler's check is similar to a check because it receives a unique check number or serial number. When a customer reports a check stolen or lost, the issuing agency cancels that check and provides the customer with a new one. Although banks issue the checks directly to customers, a separate entity manufactures them.

A traveler's check is a prepaid fixed amount that operates like cash that a purchaser can use to buy goods or services when traveling. A customer can exchange a traveler's check anywhere for cash. Major financial service financial institutions issue traveler's checks, and banks and credit unions sell them.

Some companies charge a 1 to 4% fee to issue traveler’s checks. Other banks offer the checks for free if a customer maintains a high minimum account balance. They are available in several fixed denominations in all major currencies, such as U.S. dollars, British pounds, Canadian dollars, the European euro and the Japanese yen. Most banks, hotels and retailers accept them as cash although some banks charge fees to cash them, and an increasing number of retailers no longer accept them.

How to Use Them

Traveler's checks are easy to use and are a good option for customers who do not want to use a credit card or check card or carry large amounts of cash when traveling. Traveler’s checks do not link to a customer's bank account or line of credit and do not provide personally identifiable information, which eliminates the risk of identity theft. Customers can use them as a money management tool to help with budgeting, tracking and controlling travel expenses. They do not have an expiration date.

Traveler’s checks are a handy alternative because not all credit card and debit cards are accepted in foreign countries. They are also a good option when visiting rural areas or smaller cities and islands that do not have a bank or when traveling to a hostile area. They are a safeguard in countries with fluctuating exchange rates because customers can purchase them in different currencies, which helps avoid fluctuating rates.

History

On Jan. 1, 1772, the London Credit Exchange Company was the first business to issue traveler's checks. In 1874, Thomas Cook issued circular notes that worked like traveler's checks. James C. Fargo, president of the American Express Company, was a wealthy well-known American; however, in 1890, during a trip to Europe, he was unable to get checks cashed. An American Express Company employee, Marcellus F. Berry believed the solution for taking money overseas required a check with the signature of the bearer. On July 7, 1891, Berry received copyrights for the instrument he termed the traveler’s check.

RELATED TERMS
  1. Check

    A written, dated and signed instrument that contains an unconditional ...
  2. Travel Expenses

    The costs associated with traveling for the purpose of conducting ...
  3. Smart Traveler Enrollment Program

    A service of the U.S. Department of State that lets U.S. citizens ...
  4. Bounced Check

    A slang word for a check that cannot be processed because the ...
  5. Negative Float

    The period of time between when a bank customer writes a check ...
  6. Crossed Check

    Any check that is crossed with two parallel lines, either across ...
Related Articles
  1. Personal Finance

    Traveler's Checks Vs. ATM Cash: Tips for Tourists

    Traveler's checks were once the preferred way to make purchases overseas, but most tourists now get cash at an ATM – or use credit or prepaid debit cards.
  2. Personal Finance

    Travel Smart By Planning How You'll Pay

    With a little pre-trip planning, you can avoid being stranded without adequate funds.
  3. Retirement

    Retirement Travel: Good And Good For You

    Research shows a big disconnect between how many Americans dream of travel during retirement and who saves enough to fund those trips. Don't miss out!
  4. Personal Finance

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.
  5. Personal Finance

    Top 5 Reasons Banks Won't Cash Your Check

    Learn the top reasons that a bank won't cash your check, and find out what steps you can take to prevent those scenarios from happening.
  6. Personal Finance

    Is Cash Or Credit Better For European Trips?

    If you're traveling to Europe, make sure you have a widely accepted credit card that uses chip technology. It doesn't hurt to have some cash, too.
  7. Personal Finance

    How Safe Is Traveling in Europe?

    Here, some factors to consider as you make your travel plans this year.
  8. Insurance

    The Basics Of Travel Insurance

    Before going on your trip, find out what kind of insurance coverage you will need.
  9. Tech

    How to Use Technology to Save Big on Travel

    How to leverage the online community and technology to create a one of a kind travel experience that's economical.
  10. Tech

    5 Useless Financial Products That Will Disappear Soon

    Bank deposit slip: what's that? Everyday tools of our financial life that went from indispensable to obsolete.
RELATED FAQS
  1. Are travel rewards credit cards worth it?

    A travel rewards credit card may be worth it depending on how frequently you travel and whether you can afford to spend on ... Read Answer >>
  2. When do checks expire?

    There is a legal grace period for cashing checks, but depositors and issuers may risk overdraft fees if a late check is presented ... Read Answer >>
  3. How do travel rewards cards work?

    Travel reward credit cards use a points-based system to help consumers earn bonuses and other incentives, such as airline ... Read Answer >>
  4. How do you calculate payback period using Excel?

    Understand the various fees that can be assessed on a personal or business checking account, and learn methods to avoid being ... Read Answer >>
  5. How long does it take a check to clear?

    It usually takes two days for a check to clear, but in some cases it may take longer. Discover how banks treat large deposits ... Read Answer >>
  6. What emerging markets are best suited for investing in the aerospace sector?

    Discover the best emerging markets suited for investing in the aerospace sector and how middle class growth best positions ... Read Answer >>
Trading Center