Travelers cheque

A traveler's cheque is a medium of exchange that can be used in place of hard currency. They can be denominated in one of a number of major world currencies and are preprinted, fixed-amount cheques designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.

They were generally used by people on vacation in foreign countries instead of cash, as many businesses used to accept traveler's cheques as currency. The incentive for merchants and other parties to accept them lay in the fact that as long as the original signature (which the buyer is supposed to place on the cheque in ink as soon as they receive the cheque) and the signature made at the time the cheque is used is the same, the cheque's issuer will unconditionally guarantee payment of the face amount even if the cheque was fraudulently issued, stolen, or lost. This means that a traveler's cheque can never 'bounce' unless the issuer goes bankrupt and out of business. If a traveler's cheque were lost or stolen, it could be replaced by the issuing financial institution.

Their use has been in decline since the 1990s. Around this time, a variety of more convenient alternatives, such as credit cards, debit cards, and automated teller machines, became more widely available and were easier for travelers to use. Traveler's cheques are no longer widely accepted and cannot easily be cashed, even at the banks that issue them. Other factors that have led to a decline in traveler's cheques include the fees charged by the issuer and agent, as well as the less favourable foreign exchange rate commonly used on traveler's cheques, especially compared to those on credit card transactions.

What follows are the legal terms for the parties to a traveler's cheque:

The organization that produces a traveler's cheque is the obligor or issuer. The bank or other place that sells it is the agent. The natural person who buys the cheque is the purchaser. The entity to whom the purchaser hands the cheque in payment for goods or services is the payee or merchant. For purposes of clearance, the obligor is both maker and drawee.

Traveler's cheques were first issued on 1 January 1772 by the London Credit Exchange Company for use in 90 European cities, and in 1874, Thomas Cook was issuing 'circular notes' that operated in the manner of traveler's cheques.

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