This payment document is an unconditional obligation to pay the specified amount of money to the holder, whose specimen signature is placed on the traveler's check at the time of its sale. When presenting the check for payment, the holder must sign it a second time. The key to successfully exchanging it for money is that the two signatures are identical.
More than a dozen different types of traveler's checks are used around the world. In terms of authority and popularity, four main ones can be distinguished: American Express, Visa, Thomas Cook, and CityCorp traveler's checks. In terms of the reliability and solidity of the issuing companies, these checks differ little from one another. The main difference between them can be considered the regions of use. Traveler's checks are issued in foreign and national currencies of various denominations. Their issuers can be banks, financial and travel companies, and non-bank credit organizations.
A commission is charged for selling traveler's checks (on average 1-2%). The bank will also charge a commission for returning unused traveler's checks, but its amount depends on where they were purchased: most banks charge a lower commission for customers who bought checks from them than for customers who bought checks from other banks.
Why do I need these feathers?
The rules for using a traveler's check specifically stipulate that if it is lost (stolen, burned, splashed with wine, chewed by a dog, etc.), the issuing company guarantees compensation for the 'lost' money. To do this, the victim must call the special reimbursement service phones, describe all the circumstances of the incident, and also report the series and numbers of the missing checks, the place and date of their purchase. The basis for compensation is the receipt (slip) issued when purchasing traveler's checks. By the way, the reimbursement service phone numbers of the issuing company are indicated on its reverse side. It is recommended to keep the receipt separately from the traveler's checks and treasure it like the apple of one's eye. By the way, the cashier may require its presentation when exchanging a check for money.
It is the reimbursement mechanism that makes traveler's checks a reliable and convenient way for travelers to store funds. A number of other advantages can be mentioned.
First, traveler's checks are an indefinitely valid document. Even those issued in the 19th century will certainly be redeemed by the issuing company. In that time, more than one country in the world has undergone a monetary reform that turned old banknotes into useless pieces of paper. However, checks issued 100-120 years ago are rarities, and their price far exceeds their face value. But if someone were to present a check a century old for payment, the issuing companies, true to their obligations, would accept it and pay the due amount in cash.
Second, traveler's checks are an inexpensive instrument. Exchanging checks for money at the office of the issuing company is free. In addition, checks can be exchanged for local currency at the American Express or Thomas Cook office at a more favorable rate than at commercial banks of the same country. Finally, applying for visas to some foreign countries requires the purchase of traveler's checks for a certain amount.
Third, traveler's checks are usually not stolen. It is even more pointless to try to counterfeit them. Like a banknote, a check has several modern security features and an individual number. For example, Thomas Cook checks have 17 security features, including a metallic strip with a holographic image and marks visible only under ultraviolet light.
When plastic cards appeared on the banking services market, many bankers noted a decrease in the volume of transactions with traveler's checks and predicted a 'fatal outcome' for them. The main advantage of plastic cards was the ability to take currency abroad without restrictions, while traveler's checks are treated as cash currency, and the amount of their export is limited. However, if the goal is not to take out a large sum, then the old method is not only no worse than the new one, but in many cases even better.
Indeed, a plastic credit or debit card has long become a common means of payment for many. It is convenient, takes up little space, does not require calligraphy exercises, and creates no problems when crossing state borders. Like a check, it can be restored if lost, and if you report the loss in time, you can avoid losses to the card account. Moreover, the number of ATMs around the world is in the hundreds of thousands, if not millions, while the number of offices, for example, American Express, is only 1,800. In short, who needs it, this check?
But in reality, a plastic card is not so convenient. To get one, you have to fill out a bunch of documents necessary for making the 'plastic' and opening a card account, deposit a certain amount into an insurance deposit, and during use remember about the non-reducible balance. Annual card maintenance also costs money, by the way.
Moreover, at the most inopportune moment this piece of plastic can get stuck in an ATM or become demagnetized. By the way, this is the argument that businessmen who do not use cards and travel abroad on business give first. Like, I'll get stuck in some Trinidad and Tobago with a demagnetized card, and how will I work?
There is also the option that the issuing bank may suddenly end up on the blacklist of the payment system, and all cards will be blocked, as happened in Russia in 1998.
Finally, the operation of withdrawing cash from an ATM is accompanied by a commission charge, which until recently reached 5-7%.
And dozens, if not hundreds, of articles have been written about how, with the help of simple manipulations, one can make owners of plastic cards pay for purchases they did not make. And the obvious drawback of electronic fraud is that it is discovered rather late, when losses have become substantial. In short, it is too early to consign the solid technologies of the 19th century to the archives.
To have or not to have?
Of course, in a world where the "law of the sandwich" is one of the fundamental laws, operating with the same inexorability as the force of gravity, no financial instrument can be considered completely reliable, convenient, and profitable. A chance combination of circumstances or ill intent — and the owner of a traveler's check finds himself face to face with serious troubles. Reasonable prudence will help avoid many of them, but one cannot foresee everything.
Are there any disadvantages to traveler's checks? It depends on the situation... If you are in a resort town, went to a bank in the morning and changed another check into pocket cash, spent it during the day, and at night you wanted to drop by, say, a local tavern... Yes, you might not have money on hand at the right moment. You will have to wait until morning, when the bank opens.
Sometimes problems with using traveler's checks are of the curious kind. For example, seasoned travelers assure that in Zaire, where the development of banking is at the level of the Stone Age, local cashiers refuse to accept checks that do not have a red "specimen" stamp in the middle. Alas, this is exactly how these payment documents are depicted in instructions for bank employees.
However, difficulties of a different kind are much more common. For example, the issuing company's office closes in five minutes, and the cashier — in full accordance with the current rules — demands from the check holder the receipt issued at the time of purchase. The receipt that was left in a hotel room at the other end of the city. The only thing worse would be if this document was forgotten at home.
In principle, owners of traveler's checks can be inconvenienced even at the stage of taking them out of Ukraine, since they have to be declared. The amounts allowed to be exported by means of traveler's checks fall under the general rules for taking hard currency out of Ukraine — no more than $5,000. Moreover, one should not forget the bank certificates issued when purchasing checks. A certificate for a check, as well as a certificate confirming the purchase of cash currency, will be required to be presented during customs control at the border.
Although checks are protected from counterfeiting, they, like any security, are nevertheless sometimes forged. Central banks of various countries from time to time report the detection of counterfeits, some of which are of fairly high quality. It is clear that the probability of buying a fake at a bank office is negligible, but in Ukraine there are known cases when fake dollars were purchased at perfectly normal exchange offices.
A few words should also be said about the reimbursement procedure. Theoretically, it is simple: loss — a phone call — filling out an application with the presentation of the receipt — receiving the money. In practice, everything may turn out to be a little more complicated. Many employees of issuing companies' offices treat tourists from CIS countries with undisguised suspicion. In their opinion, such people are exactly the ones capable of selling their traveler's checks to an international money laundering concern. Accordingly, the company may require a police report, and it should be borne in mind that policemen in many countries are unable to communicate not only in Russian, but also in English. In short, dealing with law enforcement officers can be quite difficult, especially for those who travel without a local guide.
Another unpleasantness is that issuing companies stipulate in advance their right to investigate the circumstances of the loss of traveler's checks — "within the time necessary for this, if the circumstances of the case so require." Until the investigative procedures are completed, there is no point in counting on compensation. Moreover, the company bears no material liability for losses that the client may incur during the investigation period due to the delay in paying compensation.
Finally, another "little thing" is the regions and places where traveler's checks can be used. As already mentioned, checks issued by American Express are most widely used in the United States. It is there that in many cases they play the role of cash, and they can be used to pay in supermarkets, shops, restaurants, and hotels, while Visa and Thomas Cook checks are preferable in Europe. Generally speaking, anyone wishing to pay with checks would do well to inquire in advance whether they will be accepted in a particular place: sometimes rather unpleasant exceptions occur.