Why This Thing in Your Wallet Is Almost Useless Today

By Damian Davila on 15 April 2015 0 comments

Fewer and fewer people are using travelers checks today, but at one time they were considered a popular form of payment when traveling abroad: There was about $9 billion in travelers checks outstanding back in 1996. Fast forward to February 2015, and that value has dramatically dropped to just $2.9 billion! This explains why one major worldwide currency exchange company, Travelex, stopped issuing travelers checks in 2008.

Here are five good reasons why fewer people are using travelers checks today — and why you probably shouldn't use them anymore, either.

1. Limited Acceptance of Checks Across the World

If their declining popularity isn't enough of a deterrent, here's another: Several countries are planning to stop accepting checks as forms of payment in the near future. For example, the U.K. set October 31, 2018 as a target date to encourage other forms of payment. Virtually all major British supermarket chains in the U.K. don't accept any form of check (or "cheque" in British English), including travelers checks.

Other countries, such as Denmark, Finland, Iceland, Norway, and Sweden, did away with checks about 30 years ago. The more countries that stop using checks, the more cumbersome it becomes for banks to process travelers checks.

2. Fewer Redemption Locations

A review of online travel forum discussions about redeeming travelers checks abroad is very discouraging. From Puerto Rico to Vietnam, many travel destinations share common pain points about processing travelers checks:

  • Travelers checks can only be redeemed at banks or exchange houses. Both of these have limited hours of operation.
     
  • Exchange rates at locations accepting travelers checks are far worse than those at other financial institutions.

3. Difficult Redemption Process

If finding a redemption location isn't hard enough, it's also difficult to cash those travelers checks. Some actual users of travelers checks complain that they:

  • Were not able to cash travelers checks at locations that sell those same checks
     
  • Had to still pay for exchange fees and commissions, even after having paid for those charges upfront
     
  • Were asked for their social security number when redeeming the checks
     
  • Must hold an account at the bank cashing the travelers checks
     
  • Had their travelers checks "bounce."

Keep in mind that on top of valid photo identification (very often your passport), you also have to present your original purchase receipt when redeeming travelers checks. This means that you have to carry your passport more often than necessary, increasing the chances of losing that valuable document.

Also, if you lose you original purchase receipt, you may be completely out of luck and may not be able to cash in your checks abroad at all.

4. Expensive Redemption Fees

On top of getting less money (from a less favorable exchange rate) in local currency, you could also get hit with additional charges. These charges can range from 0.75% to 2.5% with minimum transaction fees as well.

Some countries may also impose redemption limits. For example, redemption locations in Mexico enforce a maximum daily limit of $300-$500 and a maximum monthly limit of $4,999. This means that additional processing fees, such as commission charges, will hit your pocket again and again with each additional redemption.

5. Cheaper Alternatives

There was a time in which all credit cards would hit you with a flat fee per foreign transaction, a percentage fee for total purchase amount, and a foreign currency fee. Nowadays there are plenty of debit and credit cards that charge no fees when used abroad. (See also: 10 Signs You Ought to Get Another Credit Card)

Contact your financial institution to check if it offers a credit card without foreign transaction fees. Also take a look at our list of best travel reward credit cards with no foreign transaction fees. Remember that some financial institutions may require you to notify them in advance if you plan to use your card abroad.

Another cheaper alternative to travelers checks are ATM cards. Certain banks with very large international networks, such as Citibank, charge no fees for withdrawals at participating locations. Other banks, such as Ally, may charge you a fee of up to 1% for using an ATM in a foreign country. Depending on your destination, this charge may be much lower than the one for using travelers checks.

Contact your financial institution to find out all applicable charges and learn how to minimize ATM fees when traveling abroad.

What is your craziest story about using travelers checks abroad? Please share in the comments.

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