How Does a Traveler's Check Work?

While a traveler's check is easy to acquire and carry, you must know about the way in which it works to ensure that you spend it rightly. This Buzzle article will tell you how a traveler's check works.
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Reason to use a traveler's check
FYI
Please note that with an increase in the popularity of credit cards and debit cards, and the easy availability of ATMs, the popularity of travelers' checks has reduced. Many merchants decline to accept them.

Many people prefer to carry travelers' checks instead of cash during their travels. This is because, they practically eliminate the risk of losing money if they are stolen or lost. As the owner needs to sign the check and the vendor will have to match it with the specimen signature, there is absolutely no possibility of a thief using it. Also, if you inform the financial institution about the serial numbers of the travelers' checks that have been lost or stolen, they can block the payment of the same. Hence, they are one of the most convenient and risk-free modes of payment, especially if you are traveling on a vacation to foreign countries that have money security issues. Here is a summary on how to use travelers' checks, which will come to your aid.

Buying Travelers' Checks

Currencies
Travelers' checks are issued in several currencies like US dollars, Euro, Pounds sterling, Japanese Yen, Chinese Yuan, Canadian dollars, Australian dollar, etc.

Where to Get These Checks
Look for financial institutions that offer you travelers' checks. You can contact your bank and check with them if they issue such checks. Most banks offer this facility; in fact, they are even ready to mail the checks to you for additional fees. Some banks will charge a nominal processing fee based on the type of account you have with them. You can also try to tap in other resources like American Express, MasterCard, and even AAA. Certain credit unions, foreign exchange bureaus, and travel service organizations also provide travelers' checks.

How Much to Buy
There are 5 or 10 checks in each pad of travelers' checks. The denominations available for a traveler's check are $20, $50, $100, and even $500. American Express even offers $1,000 to its card holders. Many of the financial institutions charge 0% commission, so do some research before buying these checks. Also, calculate exactly how much cash you are going to carry and the amount you will require in the form of traveler's checks. Carry a mix of both, smaller and larger denomination checks. Place an order accordingly.

Inspect the Check
Once your traveler's check arrives, you will have to verify that it is in accordance with your requirement. Check the denominations and the number of checks. If you have ordered 10 checks worth $100, ensure you get the same. Take it back to the institution if you observe any kind of discrepancy. Once you are sure that everything is okay, you will have to sign the checks to activate them. You will have to sign in the upper left-hand side in front of the issuing authority.

Cashing Travelers' Checks

Signing the Check
Once you make a purchase at a merchant who accepts these checks, you will have to countersign the check in the lower left-hand side in his presence and also put the date. This is important as the merchant will then verify if the signs match. You can even get cash in local currency against your travelers' checks at travelex stores.

Amount of Change
A check is treated as a bank note and cash. Hence, if you spent 450 pounds in England, and then gave travelers' checks worth 500 pounds, the change will be given back to you in pounds and not in any other currency.

Utilizing it at a Distant Date
One of the best benefits is that you can utilize them whenever you want. They do not come with an expiry date. Hence, until you cash them, it is as if you have paid for them in advance as an interest-free loan to the institution issuing them. The bank or any other financial institution will utilize this money to be loaned out at an interest, thus, gaining from the transaction.

Practice Precaution
It is essential that you carry receipts of the checks with you so that you can get a replacement or refund in case your checks are stolen or lost. You can also note the serial numbers of the checks and keep it safely away from the checks. Apart from this, do carry the contact details of the issuer (of the checks) so that you can reach them in case you want a replacement.

Depositing the Check
The merchant who will receive the check will, in turn, follow the same process as that of depositing a check in the bank. Thus, the bank will credit cash in your account equivalent to the amount of a traveler's check in the merchant's account. If there is any kind of negotiable item, it will be subjected to clearance.

Things to Keep in Mind

» Remember, never accept travelers' checks from private parties.

» You can get travelers' checks in the denominations of the currency of the country you have traveled to.

» You don't have to travel all the way; just call up the financial institution or place an online order for these checks.

» Look for quality of paper, texture, holographic thread, or a watermark depending on the traveler's check to distinguish the real from the counterfeit ones. If the area of the original signature looks like it has been erased and signed again, it should raise red flags for the merchant.

» Beware that some operating merchants who accept travelers' checks may charge some kind of fees.

» Maintain a separate record by listing out which check was given to which vendor. This will keep you informed about your checks as well as spot a stolen check immediately.

» If you lose your traveler's check or it gets stolen, call up the issuing authority immediately and report the loss to them.

Beginning from the 1990s, the popularity of these checks has reduced. In fact, many merchants and banks no longer accept them in Asia and Europe. Also, due to the ease in handling of credit cards and debit cards, lesser number of people are actually taking pains to acquire them. After knowing all this, if you are still thinking whether it is worth buying them, then let me tell you that there are many people who prefer using them during their travels because of the safety it accords. Hence, it is advisable that you research if the checks are going to be easily acceptable in the country that you are going to travel to.

Our Verdict: Instead of travelers' checks, opt for overseas debit cards, credit cards, or cash exchange as you will be able to gain maximum return on them. Also, you will not have to worry throughout your vacation whether or not the hotel, tour service, or shopping areas accept your check.
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Published: March 12, 2014
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