How do travellers’ cheques work?

Travellers’ cheques are one of the oldest ways for globetrotters and tourists to spend money abroad. Although they are waning in popularity, travellers’ cheques are still accepted by banks and businesses all over the world.

What are travellers’ cheques?

Travellers’ cheques are a safe way to carry around large sums of spendable cash. Before heading to a foreign country, travellers can purchase travellers’ cheques from their bank, or other financial institutions (such as the Post Office in the UK). These fixed-sum cheques can then be cashed at a bank abroad, or used to pay for goods in a store. They can also be used to pay for items in any currency, and any change will be returned in this currency.

What are the pros of travellers’ cheques?

Travellers’ cheques are widely seen as a more secure option than cash. Each cheque has a unique serial number, so that in the event of accidental damage, loss or theft, it can be easily cancelled and replaced. You will be given a receipt containing all the serial numbers of your travellers’ cheques, and should keep this in a safe place.

When you buy travellers’ cheques, you will be asked to sign them. When you cash them out, you will be asked to sign a receipt, and these signatures will be compared to make sure that the cheque belongs to you. Most businesses will also ask to see some form of official identification (such as a passport or driver’s licence) in order to make the sale.

As they are a prepaid form of exchange, there is no risk of them bouncing; even if the cheque was forged or stolen, the issuing financial institution is bound to honour the cheque once it has been accepted by a business or bank.

What are the cons of travellers’ cheques?

Once a necessity for travellers everywhere, travellers’ cheques are fast becoming obsolete with the advent of more convenient credit and debit cards. ATMs are now accessible all over the world, and you can withdraw local currency using your bank cards from home. Businesses often charge a commission fee to accept travellers’ cheques, so withdrawing cash from an ATM can be a cheaper option. Prepaid currency cards are another option; these allow you to load a balance onto your card and use it to withdraw from ATMs with no exchange rate markup or withdrawal fees, helping you save money.

Written by Phoebe Taylor

Copyright Io4 UK Limited

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