Travelers checks - what is it? How to pay with traveler's checks and where to buy?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

American Express traveller's checks are a convenient and reliable way to store cash in foreign currency. Possessing at the same time the qualities of cash (purchasing power and face value), they have all the advantages of financial receipts (they can be restored in case of loss, as well as bequeathed). The safety of money invested in traveler's checks when buying is guaranteed by the largest international corporation, the history of which is already 164 years old.

Traveler's check: concept and main functions

Explaining what traveler's checks are is not difficult - this is a payment document, which is a monetary obligation issued by the issuing company to pay the amount (denomination of the check) to the owner, whose sample signature is presented on the check. In fact, they are a complete replacement for cash.

You can use a check either by simply cashing it or by paying with it for goods purchased or services rendered. To do this, in the presence of a teller or cashier, put a personal signature on the check (in its lower part) a second time.

The safety of funds invested in traveler's checks when buying is guaranteed by issuers, which are travel companies, commercial banks, as well as major international corporations, in particular Travelex and American Express.

A bit of history…

Now American Express, in addition to traveler's checks, issues payment cards, revolving credit cards, and is also one of the largest travel agencies in the world.

The company was organized in 1850 by William Fargo, Henry Wells and John Butterfield to provide cash transportation services around the country. The business developed rapidly, and by 1882 the company was successfully competing in the field of money transfers with the US Post Office.

By 1890, money transfers began to conquer the European continent, where such a service had not yet been provided. William Fargo, who went to Europe to set things right, came back furious. Although he was the president of a large company, he could not exchange his traditional letters of credit for cash anywhere except in major cities.

The solution to the problem was proposed by Flemming Berry, who in 1891 invented a completely new financial product for the American Express company -traveler's checks.

The new means of payment quickly gained popularity: if in 1891 it was possible to sell checks for 1920 dollars, then in 1909 the company made sales for 23 million dollars.

To determine the authenticity of checks, a simple and effective method was developed: the signature on the check was affixed 2 times: on the top line - at the time of purchase, and on the bottom - when presenting it for accounting. Matching signatures verified the owner's identity and guaranteed payment of the check.

Currency and face value

The first checks were issued in denominations of 10, 20, 50 and 100 US dollars. By 1955, American Express began issuing checks in Canadian dollars and British pounds.

In the 1970s, the company was already issuing checks in Swiss and French francs, Japanese yen and German marks. Since 1999, the issue of traveller's checks in Euros has begun with a face value of 50€, 100€, 500€, 1000€.

To date, the most common are checks denominated in British pounds sterling, Australian, Canadian, Singaporean dollars, Swiss francs. The denomination of checks in US dollars is $20, $50, $100, $1000.

Benefits of using

The main advantage of travelers checks is their safety. With proper use of them, the safety of your money is fully guaranteed. Because the checks are personal checks, no one but you can use a lost or stolen check.

No check will be cashed inthe absence of its owner or without presenting a document proving his identity. The owner of the check will be able to restore it in case of damage, loss or theft absolutely free of charge within one day.

Another important advantage is profitability. Traveler's checks in most countries are sold at a better rate than cash foreign currency, and with a minimum commission. At the same time, their reverse exchange abroad occurs at a higher rate than the conversion of cash. A big plus is also the possibility of exporting any desired amount of money from the country by traveler's checks without restrictions.

This method of storing money is especially convenient when traveling abroad. Traveler's checks can be paid at any bank in the world that provides such a service, regardless of where they were purchased.

Points of sale

The answer to the question: "Where can I buy traveler's checks?" for residents of most countries of the world is obvious: they are sold in more than 100 thousand points of American Express and in most of the world's leading banks.

The presence of a wide network of traveler's check exchange points allows you to minimize the loss of time during cashing and recovery. At American Express exchange points, travelers checks are sold and bought without charging a commission. Traveler's checks require a customer's passport or driver's license.

Using checks as a means of payment has its drawbacks: after converting checks, you still need to use banknotes of a foreign country. In addition, onsearch for a point of purchase / sale of checks and it is necessary to spend a certain time on their purchase.

Russian realities

In Russia, American Express traveller's checks appeared in 1994 thanks to Sberbank. Operations with checks were carried out in more than 6 thousand branches of Sberbank throughout the country. Over the next 10 years, other domestic banks also joined in the implementation of operations with checks, which contributed to an increase in the popularity of checks among Russians.

At the same time, travelers checks have not become official means of payment in our country. They were used as a tool for accumulating and saving foreign currency, as well as for foreign trips. Sberbank of Russia in 2008 became the undisputed world leader in the sale of American Express checks, selling them for a total of $1 billion. It was during the financial crisis that Russians began to buy travelers checks en masse. Sberbank of Russia at that time purchased a large number of checks, which later were never completely sold out.

Gradually, the demand for checks began to decline, and in 2011 Sberbank launched a new project, jointly with American Express, to issue premium and super-premium cards.

Collapsing operations with checks

Having recovered from the 2008 crisis, many domestic banks also began to issue plastic cards at an accelerated pace and acquire their own processing centers. Growing popularity of non-cash payments and development of a plastic card acceptance networkfinally undermined the popularity of travelers checks. One of the first in Russia to refuse operations with checks was VTB Bank. This happened in February 2012, after a change in the leadership of the credit institution.

Following him, Sberbank of Russia made the same decision. Since March 2013, he has completely stopped buying, selling, issuing refunds and issuing an inheritance for traveler's checks. Sberbank motivated its actions by the need to optimize the retail product line and reduce the cost of cash services for individuals. Sberbank specialists also noted that cooperation with American Express on card products will continue.

Following Sberbank, Raiffeisen-Bank announced the decision to stop all operations with traveler's checks from May 2013.

Stop selling

Having lost most of its points of sale in Russia, American Express was forced to stop selling traveller's checks on August 1, 2013. The official position of the company was that, as a result of a deep and comprehensive analysis, its specialists came to the conclusion that there was a significant decrease in demand for this service from the Russians. Further sale of traveler's checks in the Russian Federation is recognized as unprofitable.

All previously sold checks will have an unlimited validity period. It will still be possible to cash them through authorized banks, as well as at traveler's check exchange points around the world.

Of the major Russian banks, only Svyaz-Bank declares that it acceptstraveler's checks. You can't buy them today. Checks denominated in dollars and euros can be cashed by contacting the head office or regional branches of the bank and paying a commission of 2.5% of the face value.

Back to the Future

A few years ago, many economists believed that travelers checks had completely outlived themselves, giving way to plastic cards. Today this thesis is not so obvious. Increasing cases of cyber fraud, as well as the recent events of blocking transactions by Visa and MasterCard payment systems on cards of several Russian banks, clearly demonstrated all the negative aspects of this payment instrument.

Holders of plastic cards of the affected banks, located abroad, were not able to use their money. Many of them at that moment became jealous of travelers check holders, who, by definition, could not be in such a situation.

Traveler's checks have not lost their popularity in the era of the global expansion of cashless payments. A century and a half after their appearance, they continue to be a convenient and reliable means of cash payments.