Money Guide

What are travellers’ cheques?

By Martin Fagan - news@consumerchoices.co.uk

A foolproof way to take cash abroad or a bygone relic made redundant by credit cards?

For the best part of a century, Brits venturing abroad have paid their way using travellers’ cheques. For Brits holidaying abroad, forgetting to order your travellers’ cheques from the bank was akin to forgetting to renew your passport, at one time.

But in the 21st century, with all the developed world and significant parts of the developing world hooked up to the internet and eager to take your credit card, you could be forgiven for thinking that travellers’ cheques have had their day and should be consigned to the dustbin of history.

But for the canny tourist, travellers’ cheques are a key part of a three-pronged strategy to spending money while abroad, known as 3C: cash, cheques, cards.

You should always arrive at your destination with enough of the local currency in cash to keep you solvent for two days. A credit card is essential for the bigger value items like eating out, major purchases (using the card gives you protection on the goods you buy), car hire and even settling the hotel bill if you’re travelling independently.

But you need ready cash and, rather than withdrawing cash with your plastic (and paying for the privilege in exorbitant fees), travellers’ cheques have the added bonus they’re “safer” than cash, easy to use, accepted worldwide and, in terms of fees and charges, extremely cost-efficient.

What are Travellers’ Cheques?

In a nutshell: cash. Rather than taking a wad of readies to your holiday destination – and run the risk of having them stolen – travellers’ cheques can be cashed at banks, bureaux de change or in shops and restaurants. Countersign the cheque in the presence of the cashier with some form of photo ID and they give you cash.

What advantages do Travellers’ Cheques offer?

Security: when they’re issued, you have to sign each cheque and each cheque carries a unique serial number. Keep a note of the serial numbers so that you are protected in the event your cheques are lost or stolen. When you’re ready to use a cheque, you have to sign it again in the presence of the payee who will compare both signatures before handing over the cash. So make sure they match!

If the cheques get stolen or you lose them, as long as you have a note of the serial numbers, they can usually be replaced free of charge within 24 hours.

Travellers’ Cheques have no expiration date, so you can save unused cheques for your next trip. Or you can sell them back to the issuer, so keep the receipt as proof of purchase or you’ll be charged a fee for this service.

The cheques are available in a limited number of currencies, but the main denominations are sterling, euros and US dollars. If you’re travelling outside the eurozone in the USA or backpacking through the Far East or Australasia, take sterling or US dollars as these are “hard” currencies, always in demand and for which you get the best rates of exchange in the local currency.

Most issuers will sell you travellers’ cheques at zero percent commission, but they can be liable to fees when you cash them, with banks charging the lowest fee and cafes and restaurants charging a higher fee.

When cashing the cheques, be wary of flat fees and minimum charges. Minimum charges make it difficult to change small amounts of money but flat fees can offer good value if you are changing larger sums. Watch out for handling fees too, which are normally about £3 but can be higher.

Another myth is that the further flung places you travel to, the more likely it is they’ll take plastic and less likely they’ll accept a travellers’ cheque. But if you’re backpacking in rural areas of Thailand and Malaysia, you’ll probably find the opposite is true.