Travelers cheque

A travelers cheque is a preprinted, fixed-amount check designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer (usually a bank) for that privilege. As travelers cheques can usually be replaced if lost or stolen, they are often used by people on vacation in place of cash. The use of credit cards has, however, rendered them less important than they previously were; there are few places that do not accept credit cards but do travelers cheques – in fact, nowadays, many places do not accept the latter.

Travelers cheques are available in several currencies such as U.S. dollars, sterling, and euros; denominations usually being 20, 50, or 100 of whatever currency, and are usually sold in pads of five or ten cheques, e.g., 5 x €20 for €100. Travelers cheques do not expire, and unused cheques can be kept by the purchaser as long as he wishes until he is ready to spend the money. The purchaser of a supply of travelers cheques effectively gives an interest-free loan to the issuer, which is why it is common for banks to sell them "commission free" to their customers. The commission, where it is charged, is usually 1% of the total face value sold. The largest volume issuer of travelers cheques is American Express.

Legal terms for the parties to a travelers cheque are the obligor or issuer, the organization that produces it; the agent, the bank or other place that sells it; the purchaser, the natural person who buys it, and the payee, the entity to whom the purchaser writes the cheque for goods and/or services. For purposes of clearance, the obligor is both maker and drawee.

Use and acceptance

Upon obtaining custody of a purchased supply of travelers cheques, the purchaser should immediately write his signature once upon each cheque, usually on the cheque's upper portion. The purchaser will also have received a receipt and some other documentation that should be kept in a safe place other than where he carries his cheques.

When wanting to cash a travelers cheque while making a purchase, the purchaser should, in the presence of the payee, date and countersign the cheque in the indicated space, usually on the cheque's lower portion (if at a restaurant, it may be helpful to ask the waitperson to watch and wait for this to be done).

Applicable change for a purchase transaction should be given in local currency as if the cheques were banknotes.

Security concerns

It is a reasonable security procedure for the payee to ask to inspect the purchaser's picture i.d.; a driving licence or passport should suffice, and doing so would most usefully be towards the end of comparing the purchaser's signature on the i.d. with those on the cheque. The best first step, however, that can be taken by any payee who has concerns about the validity of any travelers cheque, is to contact the issuer directly; a negative finding by a third-party check verification service based on an i.d. check may merely indicate that the service has no record about the purchaser (to be expected, practically by definition, of many travelers), or at worst that he has been deemed incompetent to manage a personal checking account (which would have no bearing on the validity of a travelers cheque).

Deposit and settlement

A payee receiving a travelers cheque should follow its normal procedures with it for depositing checks into its bank account: usually, endorsement by stamp or signature and listing of the cheque and its amount on the deposit slip. The bank account will be credited with the amount of the cheque as with any other negotiable item submitted for clearance.

If the payee is equipped to process checks electronically at point of sale (see: Check 21 Act), they should still take custody of the cheque and submit it to a financial institution, particularly to avoid any confusion on the part of the purchaser.

Loss or theft

Loss or theft of travelers cheques should be reported immediately to the issuer and to the local police authority. The receipt issued when the cheques were purchased will expedite the refund process.

External link

• American Express Travelers Cheques merchant site (http://www10.americanexpress.com/sif/cda/page/0,1641,18540,00.asp?)

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