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A Guide to Travellers Cheques

Once a foreign currency staple, this form of prepaid funds has existed for hundreds of years, designed as a way to allow payment from one person to another across currencies. As the financial services sector continues to shift to online solutions , we look at how, where and why travellers cheques are used, as we discuss the relevance of this form of currency.

What are travellers cheques?

The history of the travellers cheque spans as far back as 1772 when the first of its kind was issued by the London Credit Exchange Company, in the UK. Over the coming centuries the concept became popularised on a global scale, with major banks and financial institutions adopting this form of travel money in the 20th century. American Express became the largest issuer of travellers cheques and continues to offer these services to customers to this day.

A safe and convenient method of payment for anyone travelling to foreign territories, these pre-printed cheques hold a fixed amount which can be used worldwide across a range of currencies. Designed to facilitate payments from one person to another, using different currencies, travellers cheques were initially seen as a more practical way for individuals to carry their spending money.

Travellers cheques had their heyday in the late 20th century, reaching peak popularity in the mid-90s, before alternatives such as credit and debit cards became more widely available and easier to manage financial transactions. It was reported in 2018 that a mere 1.5% of Britons use travellers cheques, a rapid decrease over the course of two decades.

How do you use travellers cheques?

When you first receive your travellers cheques, you will be required to sign each one before use, as a way of verifying your signature. Each cheque will have a fixed value (usually $20, $50, $100, $500 etc.) as well as a unique serial number which can typically be found in the top right corner.

It is important to take note of these serial numbers as they will be referenced in any case of lost or stolen cheques. Unlike cash, if anything happens to your travellers cheques, the original vendor will be able to issue a refund for the exact same value. This added level of security is why this payment method was seen as revolutionary when first introduced.

As well as signing upon receipt, you will also need to sign each travellers cheque when used by a retailer or exchanged for cash. The act of signing your name as a form of security is somewhat outdated, given the modern technologies in place nowadays.

When accepted by retailers, a travellers cheque will be treated like local currency, which means you should receive any change in the standard, local currency.

Where can I get travellers cheques?

Due to dwindling demand, travellers cheques are not as readily available as they once were. However, they can still be acquired from some banks and financial institutions, post offices and currency exchange offices, like Travelex.

One thing to note is you may be required to settle the handling, commission or cash-in fees that often accompany travellers cheques, and these can be expensive, amounting to 2 - 3% in some cases. This cost is another reason they are no longer as frequently used.

Where can I use travellers cheques?

Generally, travellers cheques are still accepted all over the world, albeit harder to find vendors selling them and retailers accepting them as legal tender. Consider your destination before deciding on this form of travel money: if you are travelling to major cities there is more chance of you finding somewhere to cash your cheques or use them for in-store purchases. However, more remote destinations may not be equipped or able to accept this type of funds.

How safe are travellers cheques?

The original blueprint for travellers cheques was a paper payment method which could be used as foreign currency but was more secure than handling cash. At the height of its popularity, travellers cheques were generally considered much safer than cash due to the added security of their unique serial numbers, meaning customers could cancel and replace cheques if need be. These numerical codes were a money-back guarantee for anyone whose cheques were misplaced, destroyed or stolen. Another added benefit, if your travellers cheques are intercepted, you will not be vulnerable to bank fraud, as they are in no way connected to your bank account, unlike credit or debit cards.

Financial security measures have evolved greatly since the inception of travellers cheques, however, with the introduction of PIN codes, two-factor authentication, fingerprint touch ID and facial recognition, to name a few forms of fintech security commonly available now. With this in mind, the concept of a travellers cheque no longer measures up in terms of fraud protection and data encryption.

Travellers cheque vs. Cashiers cheque: What is the difference?

In terms of appearance, a travellers cheque looks nearly identical to a standard issue cashier's cheque: but are they similar in any other ways?

A cashiers cheque is issued by a bank or financial institution and is designed to be processed quickly, by the individual whose name is printed on the cheque. Conversely, a travellers cheque is for use overseas, is loaded with prepaid foreign currency - usually USD or GBP - and does not have a name or account number printed on it, although it does require a signature. Because travellers cheques do not have any bank details printed on them, they are deemed safer than cashiers cheques in terms of potential for fraudulent use. In addition to this, they are paid for when printed, meaning it is not possible for a travellers cheque to bounce.

What are the alternatives?

Credit or debit cards.

If you are worried about travellers cheques not being widely accepted where you are going, then this form of travel money will offer more flexibility. Using your regular bank cards overseas provides a record of spending and offers maximum convenience, but there are also some frequently flagged concerns. Primarily these concerns focus on the sky-high fees and below-average exchange rates related to using your debit or credit card abroad. This isn’t always the case, however, as many banks and financial institutions offer travel credit cards, tailored to suit the needs of frequent flyers.

Travel money cards

Prepaid travel money cards are the modern equivalent to travellers cheques and have become very popular. This is largely due to the fact that they are totally separate from your regular bank account, allowing users to spend their balance freely without the worry of potential fraud or overspending. Preloaded with funds, travel money cards often help limit additional currency exchange charges. In addition to this, in spite of fluctuating currency rates, these cards let customers lock-in a favourable exchange rate ahead of time.

International bank accounts

If you are headed overseas for a sustained period of time, it could be more convenient and cost-effective to open a bank account in your destination country. You would be subject to the relevant security and eligibility checks but this decision pays off if you are making regular international money transfers or being paid in a different currency by foreign clients. Find out more about this option by reading our guide: How to Open a Bank Account Overseas.

Due to the growing alternative digital payment methods available nowadays, it seems this age-old travel money no longer measures up in terms of accessibility, cost and convenience. When travellers cheques were originally launched, ATM withdrawals were not commonplace for travellers, and digital point of sale systems had not been invented. Nowadays, it is easy to access local currency using an assortment of different payment methods such as debit or credit cards, travel money cards or money transfer apps .

The best option for anyone who is reluctant to use their debit or credit card overseas, would be to use a prepaid travel money card. Prepaid travel money cards are a safer and more widely used alternative to travellers cheques, and customers do not need to seek out a bank to use them, are not required to sign for each transaction and security measures in place are far more advanced. This method enables customers to secure multiple foreign currencies, locking in the optimum exchange rate for your currency pairing ahead of your trip abroad. Use our comparison tool to ensure you receive the most competitive exchange rates for your international money needs.

Related content

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• A Guide to Travel Money Cards Travel money cards are a popular payment method for individuals headed abroad. Customers will load funds onto the card, using the money as foreign currency when overseas, much like a debit card is used at home. Also known as travel money prepaid cards or currency cards, they facilitate free foreign transactions and overseas ATM withdrawals. May 3rd, 2024
• Revealed: Summer Cruises Increase your CO2 Emission by 4700% per KM vs Train Travel Travelling by cruise ship rather than train this summer could increase passengers’ CO2 emissions each kilometre by 4716%, MoneyTransfers.com can reveal. May 3rd, 2024
• 10 Years of Data Predicts the Go-to Holiday Destinations for Brits Now COVID Is Over To establish the expected changes to tourism and GBP(£) spend abroad going forwards, MoneyTransfers.com analysed 10 years' worth of UK travel data from the Office for National Statistics (ONS) - 2009 - 2019, to discover and predict where Brits will be travelling to in the next 10 years now that travel is well and truly back on again since Covid! May 22nd, 2024

• Millennial Guide For Baby Boomers & Generation X We looked over the stats for the past few years, and found that out of £1.5 billion payments abroad, 1 in 5 debit cards payments are made by the UK residents travelling abroad and credit card payments made outside the UK has increased in recent years, reaching 467 million payments. May 3rd, 2024

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Questions of Cash: 'I had found some old traveller's cheques and tried to cash them in. But the banks said no'

The visa dollar traveller's cheques are about 15 years old and have a face value of $500, article bookmarked.

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Q. I recently found some Visa dollar traveller's cheques issued by Citicorp. They are about 15 years old and have a face value of $500 [£345 at today's exchange rate]. I would like to cash them in.

I took them to Lloyds bank, which has my current account. It initially accepted, countersigned and stamped them. Three days later it called me to say that its head office had refused to accept the cheques and would I please collect them? Lloyds then told me to take them to Barclays. However, Barclays refused to accept them as they had been stamped by Lloyds. Lloyds refuses to take responsibility for its mistake. I don't have the original receipts any more. HV, by email

A. We spoke to Citi, which is willing to encash them, but needs to discuss with you the most practical way to arrange this. A spokesman for Citi said: "Clients need a financial institution they can count on for the long term, so Citi is pleased to assist in covering the value of these cheques in this instance."

You tell us that in the meantime you escalated your complaint with Lloyds. "The bank has now said it will refund the cheques as well as compensate me for the inconvenience and as a goodwill gesture," you told us.

Am I paying too much VAT with TalkTalk?

Q. TalkTalk has refused to provide any information about the VAT charged on our phone and internet account.

First I was told I would need to subscribe to paper billing, but that provided no information, and then I was repeatedly promised letters that never arrived.

I want to know if I have been overcharged. My utility company charges 5 per cent VAT, but it seems that I am being charged 20 per cent by TalkTalk. GP, London

A. VAT has been charged correctly. Energy is subject to a reduced rate of VAT at 5 per cent. Telecoms, including broadband, are subject to the full VAT rate of 20 per cent. But TalkTalk apologises for not providing an adequate response when you requested VAT invoices. There is a section on its website – help2.talktalk.co.uk/how-do-i-request-vat-invoice – which explains how to arrange both paper and VAT invoices.

How should I fund a buy-to-let apartment?

Q. I am purchasing a buy-to-let apartment. I own three other properties, which I financed with cash. This latest property will cost me £51,000 and I have around £30,000 in cash. I am 62, self-employed and my taxable income is between £50,000 and £60,000 a year. What is my best mortgage option for raising the other £20,000? I can probably repay the money in full within two years. BB, Northern Ireland

A. Ray Boulger, of the mortgage broker John Charcol, questions whether a mortgage is your best option. Set-up costs can be high, most lenders will require a minimum loan of £25,000, and you need to find a mortgage that comes without early-repayment charges. As you are buying in Northern Ireland, you are further restricted as several lenders will not provide mortgages there.

"I think you would find it cheaper to borrow on an unsecured basis – either an unsecured loan or a 0 per cent money-transfer credit card deal, or perhaps a combination of the two," he said. "With several lenders offering unsecured loans from £7,500 up to as much as £25,000 in some cases, I think this would probably be a better option than a mortgage. Of the credit cards that offer a money transfer, Virgin Money currently has the best deal for new customers – 0 per cent for 32 months for a 1.69 per cent fee. Once the fee has been paid, there are no costs for two years and eight months.

"For disciplined borrowers, the best way to maximise the benefit of this card is to set up a direct debit to pay the minimum each month – and then put any additional savings in an account that pays interest; the intention would be to save enough to pay off the credit card after 32 months. The cost of the money on this basis, in effect, is less than 0.7 per cent a year.

"MBNA also provides this facility, but is less competitive. Both Barclaycard and MBNA offer money transfers to some customers. The best rate currently available on personal loans is 3.3 per cent, from HSBC, M&S and Zopa. M&S provides loans between £7,500 and £15,000 for up to seven years; HSBC has loans between £7,000 and £15,000 for up to five years; Zopa offers loans between £7,500 and £15,000 for two to five years.

"Zopa also has loans of between £15,001 and £20,000 for four or five years at 3.6 per cent, and between £20,001 and £25,000 for one to five years at 3.9 per cent. There are no early-repayment charges with Zopa.

"As a comparison, for a small remortgage on a buy-to-let basis meeting the key requirements, the cheapest deal is from Leeds building society at 2.4 per cent, which is a 3.59 per cent discount on its standard variable rate for two years. This is available up to 60 per cent loan to value and has a fee of only £199, a free valuation and, on remortgages, no legal fees. There are no early- repayment charges."

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Lloyds TSB introduces pre-paid travel money card

British bank Lloyds TSB has launched a PIN-protected pre-paid re-loadable payment card designed to replace paper travellers' cheques and cash.

10 January 2007 Be the first to comment

The Lloyds TSB Travel Money Card costs £7.50 and can be pre-loaded with between £150 and £3000 in either euros or US dollars. The card can be used to make purchases at retail outlets that acccept Visa payments and to withdraw money from ATMs. When abroad cardholders can call a telephone number to top up funds, check the balance and access details of recent transactions. The card is valid for two years allowing travellers to save unused cash from one trip for their next trip. At the end of the two years any unused funds can be transferred to a new card or sent back to the customer. Gerrard Schmid, Lloyds TSB transaction banking director, says the card is the future for foreign currency: "You can load only what you want to spend and feel confident that if it's reported lost or stolen the money can be credited to a new Travel Money Card and you won't be liable for any losses." Lloyds TSB says research conducted amongst its customers found that 69% are likely to consider taking the pre-paid with them next time they travel.

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