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by Carmella on January 15th, 2007

Carmella

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How does the Travellers Cheques system work?

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  • by Anonymous on January 15th, 2007

    Anonymous

    OK, Traveller's Checks 101:

    There are times when it makes sense to carry traveler's checks (or "cheques," to use the spelling favored by Britain and American Express). For example:

    - You're visiting a country for only a few hours (e.g., while waiting to change planes or on a shore excursion from a cruise ship).
    - If you've just bought a snack or souvenir and the vendor doesn't take credit cards, using a traveler's check may be your only recourse.
    - You're low on cash and the ATM network is down. (This seems to happen most often at night or on weekends.)
    - The ATM won't accept your PIN, or the machine lacks multilingual instructions and you can't figure out how to get cash.

    Let's assume that you've decided to carry a modest stash of travellers cheques for use in emergencies. What kinds of checks should you buy? And in what denominations?

    When purchasing traveler's checks or travellers cheques, stick to major brands like American Express, Barclays, Visa, Citibank, and Thomas Cook.

    Buy at least some of the checks in small denominations, for two reasons: Shopkeepers may be reluctant to accept large checks for modest purchases, and you'll want to avoid getting stuck with more foreign currency than you need.

    If you're traveling with a companion, use dual-signature travellers checks such as the American Express "Travelers Cheques for Two." These are especially handy in emergencies, since either partner can spend or cash the checks.

    Consider buying foreign-currency checks--especially Euro checks, if you're visiting the Euro currency region. This way, you can use traveler's checks in shops, hotels, etc. without paying multiple commissions or high conversion fees. (But don't buy more than you plan to use, since unused cheques will have to be changed back into your home currency unless you save them for another trip.)

    Banks and credit unions sell traveler's checks, as do the AAA, the CAA, and many other national automobile associations.

    The traditional purchase fee for travellers cheques is 1%, although some agencies charge more. Shop around before buying; your bank or credit union may offer free check purchases with certain types of accounts, and members of automobile associations are usually exempt from purchase fees.

    Caution: Avoid the new prepaid travel debit cards, which are like a debit-card version of traveler's checks, unless you're willing to tolerate mind-boggling currency-exchange fees. See my American Express Traveler's Cheque Card and Visa TravelMoney Card article for details.

    Traveler's checks are advertised as being "safer than cash," because the issuers promise to replace them if they're lost or stolen. However, the reality is often more harsh: If the issuer decides that you've been negligent, it may refuse to pay up.

    In practical terms, this means you should handle travellers cheques as if they were cash. You should also keep copies of your receipt and transaction record in two or more places, to be sure of having a record if you need to claim a refund.

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