When travelling abroad you will have to make use of the local currency when purchasing goods and services. However, it’s not always feasible or safe to carry cash in a foreign country.
We have a look at how traveller’s cheques attempt to solve this problem, and we consider their place in the current marketplace.
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What are traveller’s cheques?
According to Sebastien Alexanderson, CEO of National Debt Advisors, traveller’s cheques are a way of transporting currency between countries when the carrying of cash is not recommended. While still functional in some situations, they are now considered dated.
Formerly accepted from foreigners by many businesses, traveller’s cheques were considered reliable because they would not “bounce” – unless the person using them went bankrupt. They could also be replaced by their linked financial institution if they were stolen or lost.
Traveller’s cheques were basically interest-free loans, which were taken out by travellers from financial institutions. However, rather than attracting interest, travellers were charged a fee to purchase these cheques.
Are they still used today?
Alexanderson says that advances in technology have made traveller’s cheques almost obsolete and a nuisance to convert. Alternatives started surfacing in earnest during the 1990s.
“ATMs and chip-and-pin devices are available in every corner of the world. As long as you have a debit card, it’s cheaper and safer to use your card,” says Alexanderson.
“If, for whatever reason, you don't have a bank account and feel that cash is too risky to carry, you could attempt to source and use traveller’s cheques,” he notes.
Traveller’s cheques are mostly safe. However, they have attracted fraudsters in the past. For example, people have bought them, sold them at a 50% discount, and then reported them as “stolen”. This led to financial institutions reimbursing them as well, so the user would gain a large profit.
Nowadays it makes more sense to simply use your debit or credit card when paying abroad. It’s easier to navigate, and you don’t have to keep track of numerous documents.
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