Traveler's cheque
Encyclopedia
A traveler's cheque is a preprinted, fixed-amount cheque
designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.
Traveler's cheques are available in several currencies such as U.S. dollars
, Canadian dollar
s, Pounds sterling
, Japanese yen
, Chinese Yuan
and Euro
; denominations usually being 20, 50, or 100 (x100 for Yen) of whatever currency, and are usually sold in pads of five or ten cheques, e.g., 5 x €20 for €100. Traveler's cheques do not expire, so unused cheques can be kept by the purchaser to spend at any time in the future. The purchaser of a supply of traveler's cheques effectively gives an interest-free loan to the issuer, which is why it is common for banks to sell them "commission free" to their customers. The commission, where it is charged, is usually 1-2% of the total face value sold.
In 2005, American Express released the American Express Travelers Cheque Card, a stored-value card
that serves the same purposes as a traveler's cheque, but can be used in stores like a credit card. It however discontinued the card in October 2007. A number of other financial companies went on to issue stored-value or pre-paid debit cards containing several currencies that could be used like credit or debit cards at shops and at ATMs, mimicking the traveler's cheque in electronic form. One of the major examples is the Visa TravelMoney card.
was issuing 'circular notes' that operated in the manner of traveler's cheques.
American Express
was the first company to develop a large-scale traveller's cheque system in 1891, and is still the largest issuer of traveler's cheques today by volume.
American Express's introduction of traveler's cheques is traditionally attributed to employee Marcellus Flemming Berry
, after company president J.C. Fargo had problems in smaller European cities obtaining funds with a letter of credit
.
who buys it, and the payee, the entity to whom the purchaser writes the cheque for goods and/or services. For purposes of clearance, the obligor is both maker and drawee.
once upon each cheque, usually on the cheque's upper portion. The purchaser will also have received a receipt and some other documentation that should be kept in a safe place other than where he or she carries the cheques.
When wanting to cash a traveler's cheque while making a purchase, the purchaser should, in the presence of the payee, date and countersign
the cheque in the indicated space, usually on the cheque's lower portion (if at a restaurant, it may be helpful to ask the waiter to watch and wait for this to be done).https://www209.americanexpress.com/merchant/singlevoice/USEng/FrontServlet?request_type=navigate&page=travelersChequesAndGiftCheques
Applicable change for a purchase transaction should be given in local currency as if the cheques were banknotes.
Several travellers cheques have been created; the most widely accepted travellers cheques are:
; a driver's license or passport should suffice, and doing so would most usefully be towards the end of comparing the purchaser's signature on the ID with those on the cheque. The best first step, however, that can be taken by any payee who has concerns about the validity of any traveler's cheque, is to contact the issuer directly; a negative finding by a third-party cheque verification service based on an ID check may merely indicate that the service has no record about the purchaser (to be expected, practically by definition, of many travelers), or at worst that he or she has been deemed incompetent to manage a personal chequing account (which would have no bearing on the validity of a traveller's cheque).
In the United States
, if the payee is equipped to process cheques electronically at point of sale (see: Check 21 Act
), they should still take custody of the cheque and submit it to a financial institution, particularly to avoid any confusion on the part of the purchaser.
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.
Usage
As traveler's cheques can usually be replaced if lost or stolen (if the owner still has the receipt issued with the purchase of the cheques showing the serial numbers allocated), they are often used by people on vacation in place of cash.Traveler's cheques are available in several currencies such as U.S. dollars
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
, Canadian dollar
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
s, Pounds sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
, Japanese yen
Japanese yen
The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...
, Chinese Yuan
Chinese yuan
The yuan is the base unit of a number of modern Chinese currencies. The yuan is the primary unit of account of the Renminbi.A yuán is also known colloquially as a kuài . One yuán is divided into 10 jiǎo or colloquially máo...
and Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
; denominations usually being 20, 50, or 100 (x100 for Yen) of whatever currency, and are usually sold in pads of five or ten cheques, e.g., 5 x €20 for €100. Traveler's cheques do not expire, so unused cheques can be kept by the purchaser to spend at any time in the future. The purchaser of a supply of traveler's cheques effectively gives an interest-free loan to the issuer, which is why it is common for banks to sell them "commission free" to their customers. The commission, where it is charged, is usually 1-2% of the total face value sold.
In 2005, American Express released the American Express Travelers Cheque Card, a stored-value card
Stored-value card
A stored-value card refers to monetary value on a card not in an externally recorded account and differs from prepaid cards where money is on deposit with the issuer similar to a debit card...
that serves the same purposes as a traveler's cheque, but can be used in stores like a credit card. It however discontinued the card in October 2007. A number of other financial companies went on to issue stored-value or pre-paid debit cards containing several currencies that could be used like credit or debit cards at shops and at ATMs, mimicking the traveler's cheque in electronic form. One of the major examples is the Visa TravelMoney card.
History
Traveler's cheques were first issued on 1 January 1772 by the London Credit Exchange Company for use in ninety European cities, and in 1874 Thomas CookThomas Cook
Thomas Cook of Melbourne, Derbyshire, England founded the travel agency that is now Thomas Cook Group.- Early days :...
was issuing 'circular notes' that operated in the manner of traveler's cheques.
American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
was the first company to develop a large-scale traveller's cheque system in 1891, and is still the largest issuer of traveler's cheques today by volume.
American Express's introduction of traveler's cheques is traditionally attributed to employee Marcellus Flemming Berry
Marcellus Flemming Berry
Marcellus Flemming Berry invented the Traveller's cheque when working for American Express. -References:...
, after company president J.C. Fargo had problems in smaller European cities obtaining funds with a letter of credit
Letter of credit
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking....
.
Terminology
Legal terms for the parties to a traveler's cheque are the obligor or issuer, the organization that produces it; the agent, the bank or other place that sells it; the purchaser, the natural personNatural person
Variously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...
who buys it, and the payee, the entity to whom the purchaser writes the cheque for goods and/or services. For purposes of clearance, the obligor is both maker and drawee.
Use and acceptance
Upon obtaining custody of a purchased supply of traveler's cheques, the purchaser should immediately write his or her signatureSignature
A signature is a handwritten depiction of someone's name, nickname, or even a simple "X" that a person writes on documents as a proof of identity and intent. The writer of a signature is a signatory. Similar to a handwritten signature, a signature work describes the work as readily identifying...
once upon each cheque, usually on the cheque's upper portion. The purchaser will also have received a receipt and some other documentation that should be kept in a safe place other than where he or she carries the cheques.
When wanting to cash a traveler's cheque while making a purchase, the purchaser should, in the presence of the payee, date and countersign
Countersign (legal)
Countersigning means writing a second signature onto a document. For example, a contract or other official document signed by the representative of a company may be countersigned by his supervisor to verify the authority of the representative...
the cheque in the indicated space, usually on the cheque's lower portion (if at a restaurant, it may be helpful to ask the waiter to watch and wait for this to be done).https://www209.americanexpress.com/merchant/singlevoice/USEng/FrontServlet?request_type=navigate&page=travelersChequesAndGiftCheques
Applicable change for a purchase transaction should be given in local currency as if the cheques were banknotes.
Several travellers cheques have been created; the most widely accepted travellers cheques are:
- Thomas Cook GroupThomas Cook GroupThomas Cook Group plc is a travel company created on 19 June, 2007 by the merger of Thomas Cook AG and MyTravel Group plc. At flotation on the London Stock Exchange 52% of the shares in the new company were held by the German mail order and department store corporation Arcandor and 48% owned by...
- American ExpressAmerican ExpressAmerican Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
Security concerns
It is a reasonable security procedure for the payee to ask to inspect the purchaser's picture IDIdentity document
An identity document is any document which may be used to verify aspects of a person's personal identity. If issued in the form of a small, mostly standard-sized card, it is usually called an identity card...
; a driver's license or passport should suffice, and doing so would most usefully be towards the end of comparing the purchaser's signature on the ID with those on the cheque. The best first step, however, that can be taken by any payee who has concerns about the validity of any traveler's cheque, is to contact the issuer directly; a negative finding by a third-party cheque verification service based on an ID check may merely indicate that the service has no record about the purchaser (to be expected, practically by definition, of many travelers), or at worst that he or she has been deemed incompetent to manage a personal chequing account (which would have no bearing on the validity of a traveller's cheque).
Black market
One of the main advantages travellers cheques provide is the replacement if lost or stolen. This feature has also created a black market where swindlers buy travellers cheques, sell them at 50% of their value to other people (such as travellers) and falsely report their travellers cheque stolen with the company where the cheque has been obtained. As such, they get back the value of the travellers cheque and make 50% of the value as profit.Deposit and settlement
A payee receiving a traveler's cheque should follow its normal procedures for depositing cheques into its bank account: usually, endorsement by stamp or signature and listing of the cheque and its amount on the deposit slip. The bank account will be credited with the amount of the cheque as with any other negotiable item submitted for clearance.In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, if the payee is equipped to process cheques electronically at point of sale (see: Check 21 Act
Check 21 Act
The Check Clearing for the 21st Century Act is a United States federal law, , that was enacted on October 28, 2003 by the 108th Congress. The Check 21 Act took effect one year later on October 28, 2004...
), they should still take custody of the cheque and submit it to a financial institution, particularly to avoid any confusion on the part of the purchaser.