Money Guide

Travellers’ cheques – worth it or not?

By Dominic Welling

dominicwelling@consumerchoices.co.uk

If you’re holidaying abroad, should you bother to take travellers’ cheques or stick to using plastic?

For the best part of a century, travellers’cheques were very much the currency of the foreign traveller. But 20 years ago, the widespread acceptance of credit and debit cards throughout the world made travellers’ cheques seem a bit old hat.

However, despite the proliferation of plastic in the wallets and purses of Brits venturing abroad, there are still pros and cons to using travellers’ cheques.

Advantages

• Safer than cash - if stolen or lost you can obtain a refund or replacement, usually within 24 hours
• Convenient - available from the Post Office or buy online
• Easy to use - sign each cheque before you travel, make a note of the serial numbers, countersign when you use them to pay or exchange for local currency
• Any change is provided in local currency
• Exchanged at banks; many hotels, restaurants & shops; FX bureaus and AmEx Travel locations (photo ID may be needed)
• They don't expire, so save them for another trip or sell them back to the issuer

Taking a small amount of foreign cash abroad with you to cover the first day or so is a good idea. Ideally, if you want to have more cash to spend, the remainder should be taken as travellers’ cheques, simply because they’re more secure and, if stolen or lost, can be replaced whereas cash can’t.

Disadvantages

• Upfront payment
• Not accepted everywhere
• Signatures need to match - they cannot be cashed for,or by, other people
• Small fee incurred in use
• Need to keep record of numbers
• They lack the anti-fraud or insurance benefits of some credit card purchases
• Selling them back to the issuing institution could cost you a fee.

Historically, travellers’ cheques have had fees attached. However, in recent years, faced with the competition from a growing number of people who just pack plastic, the biggest issuer of travellers’ cheques American Express has reduced its issuing fees, in many instances, to zero.

For example, ordering £500 of travellers’ cheques online(minimum order £150, maximum £2,500), the commission charged by Amex would be zero and the competitive exchange rate of 1.559 means £500 would buy you US$779.50.

But beware - some issuers such as banks or travel agents simply issue Amex travellers’ cheques and charge you a fee for being the middleman in the deal. The travellers’ cheque market is a competitive one, so shop around for a fee-free deal.

When you cash your cheques abroad, banks and bureaux de change may charge a small commission. The amount is set by the bank or bureau, and varies from country to country.

Another aspect of travellers’ cheques you should consider is the currency you request your provider to issue them in. Brits ordering their travellers’ cheques in sterling and then cashing them abroad will be charged a raft of fees by the issuer, bank, shop or restaurant that cashes them.

The exchange rate will favour the cashier, so your hard-earned pounds will buy less of the local currency. And some smaller retailers and restaurants abroad may refuse payment in sterling, simply because they may lack the technology to calculate the conversion.

Sterling-denominated cheques also attract issuing fees. For example, Marks and Spencer offers 0% commission on foreign travellers’ cheques (US dollars, euros, etc) but charges 1% commission on sterling-denominated travellers’ cheques. If you’re ordering £500 of cheques, it’ll cost you a fiver commission.

Buying your cheques in the currency of the country you’re visiting has a big advantage: you’ll still pay the upfront fees to the issuer, but when you cash the cheque in the local currency when abroad, you’ll generally get the full face value of the cheque (if you’re cashing a $200 cheque, you’ll actually get $200 in cash).

Are traveller’s cheques becoming outdated?

Increasing numbers of foreign retailers and merchants are no longer accepting travellers’ cheques, and instead prefer credit cards or cash.

Therefore in many places travellers’ cheques are only useful for changing into local currency in banks or bureaux de change.

In really remote destinations travellers cheques can be a waste of time as you could find it impossible to cash them.

Also, the range of currencies offered as travellers’ cheques is limited – they are available in Sterling, Euros, US Dollars, Canadian Dollars, Australian Dollars, Japanese Yen, Chinese Renminbi, and South African Rand. However, some issuers will not cover all the currencies, with some only offering US dollars and euros.