The first ever traveler’s check was issued on January 1, 1772, by the London Credit Exchange Company. It came into being long before the first credit card in 1958. The question is, are traveler’s checks obsolete or do they still have a place in modern travel?
What is a traveler’s check?
A traveler’s check is a medium of exchange that you can use in place of cash when traveling.
You purchase a traveler’s check from a financial institution and then take it with you to a foreign country. When you arrive, you visit a business that accepts traveler’s checks as currency or an institution that will cash your check in the local currency. You are supposed to sign the check when you are issued the traveler’s check and then again when you cash the check. The signatures must match.
Traveler’s checks are often sold in increments of 20, 5o, or 100 and in pads of five to 10 checks. They do not expire so can be spent at any time. Essentially, when you buy traveler’s checks, you are giving the issuer an interest-free loan. However, some institutions still charge commissions ranging from one to three percent.
Where can you use traveler’s checks?
Originally, you could use traveler’s checks to make purchases with retailers such as stores and restaurants and could also cash them at currency exchange institutions, banks, and hotels. However, that is no longer the case.
Security concerns have caused many retailers to stop accepting traveler’s checks, making them less attractive to travelers. One of the problems was that scam artists would buy traveler’s checks and sell them at 50% of their value and then would report their checks stolen. They would get back the value of the traveler’s check and make 50% of the value as profit.
Further, the use of traveler’s checks declined greatly with the rise in ATMs and the acceptance of debit and credit cards in the 1980s and 90s.
Now you will have to research the destination where you would like to use a traveler’s check carefully to ensure they will be accepted. Further, you should consider if it’s the most cost-effective and convenient solution.
3 traveler’s checks alternatives to consider
What are the other ways to safely and conveniently access your money while overseas? As we mentioned above, credit and debit cards have largely replaced traveler’s checks. Here’s more on these options.
1. Credit cards
Credit cards are revolving credit accounts that come with a set credit limit. You can make purchases and get cash advances up to your set limits. It’s best to get a credit card with the Visa or Mastercard branding and an EMV chip so that it will be accepted by most merchants around the world. Note, if you don’t pay off your balance in full each month, you will be charged interest on the amount that carries over.
Credit cards offer a convenient way to make purchases while traveling because you don’t have to carry cash or deal with converting money. The conversion will happen automatically when your card is charged. Further, they often have fraud protection attached to them in case the card gets lost or stolen.
When choosing a card to travel with, pay attention to the fees and benefits. Look for cards with:
- No foreign transaction fees.
- Fraud protection.
- Liability coverage.
- Low cash advance fees.
- Competitive interest rates.
- Travel rewards.
This will help to keep your costs down and benefits up. The Deserve Classic Mastercard and Deserve Pro Mastercard are two great options with no annual fee and no foreign transaction fee.
Keep in mind, approval will be based on your credit. However, there is a wide range of cards that cater to various credit score ranges.
Compare personal credit cards here.
2. Debit cards
Debit cards are also cards you can use to make purchases and withdraw cash from ATMs but they are attached to checking accounts. With a debit card, you can only spend what you have in your account. This can be a good thing and a bad thing depending on your situation.
As with credit cards, it’s best to get a debit card with a Visa or Mastercard logo and EMV chip so it will be widely accepted. Further, you’ll want to look for checking accounts with low account and ATM fees, no foreign transaction fees, and fraud protection. We recommend the Capital One 360 checking account and the Charles Schwab High-Yield Investors Checking Account. Note, your credit and banking history may be considered.
3. Prepaid cards
A third option is to load money onto a prepaid credit card and use it while traveling. Visa or Mastercard branded cards with EMV chips are best. With this option, you will only be able to spend what you load onto the card. This can help to protect your credit or bank accounts while traveling because the prepaid account is separate from both. Look for no foreign transaction fees and a low monthly service fee. You can use this option no matter your credit history!
All three of these can work well for you while traveling out of the country and are much more common than traveler’s checks in today’s world.
Pros and cons of traveler’s checks
In summary, here are the pros and cons of traveler’s checks.
- If lost or stolen, the check is typically refunded.
- Easier than carrying cash.
- Helpful if the place you are going doesn’t have ATMs.
- May make you less susceptible to fraud (credit card).
- Can be a good back up money source.
- No longer accepted by most merchants (stores and restaurants).
- Not accepted by all banks, hotels, or exchange offices.
- Cost 1% to 3% of the check amount at the time or purchase in many cases.
- Another fee of 1% to 3% may be charged at the time of cashing the check if your check is not in the currency of the destination.
In short, traveler’s checks have become mostly obsolete. They were created in a time long before plastic credit and debit cards were in circulation and are not as practical as they once were. While there may be the one-off scenario when a traveler’s check comes in handy, your better bet is to opt for a credit card, debit card, or prepaid card.
Want to find the best fit for you? You can start by comparing personal credit cards below.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.