What is a Traveler's Check
A traveler's check is a medium of exchange utilized as an alternative to hard currency. The product typically is used by people on vacation in foreign countries. They offer a safe way to travel overseas without cash. 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 regular check because it has a unique check number or serial number. When a customer reports a check stolen or lost, the issuing company cancels that check and provides a new one.
A traveler's check is for a prepaid fixed amount and it operates like cash, so a purchaser can use it to buy goods or services when traveling. A customer can exchange a traveler's check 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 major currencies, such as U.S. dollars, British pounds, Canadian dollars, the European euro and the Japanese yen. Many banks, hotels and retailers accept them as cash although some banks charge fees to cash them. However, with the rising use of prepaid, debit and credit cards, an increasing number of retailers and merchants no longer accept traveler's checks.
How to Use Traveler's Checks
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 want to avoid carrying large amounts of cash when traveling. Traveler’s checks are not linked to a customer's bank account or line of credit and do not contain personally identifiable information, thus eliminating the risk of identity theft.
Traveler’s checks are a handy alternative because not all kinds of credit card and debit cards are accepted in some 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 of Traveler's Checks
On Jan. 1, 1772, the London Credit Exchange Company was the first business to issue traveler's checks. In 1874, the Thomas Cook company issued circular notes that worked like traveler's checks.
James C. Fargo, the president of the American Express Company, was a wealthy well-known American, who was unable to get checks cashed during a trip to Europe in 1890. His company's employee, Marcellus F. Berry, believed that the solution for taking money overseas required a check with the signature of the bearer, and devised a product for it. On July 7, 1891, Berry received copyrights for the instrument he termed the traveler’s check.