I’ll be leaving on a trip to Europe in a few days and just spent the last hour signing my Traveler’s Cheques. I wanted to know if you have some insight on how these actually work.
Here are my questions (no help on the cheque’s site)
Let’s say someone steals my cheques. I call American Express and they come over with new checks. That much I understand. I have paid for the security of having the checks instead of cash.
Now, just after my checks are stolen, the thief uses one of the cheques to buy dinner and booze (let’s say) from a restaurant. So a bad check has been passed.
There are two checks out there now (my stolen original and the one I was just given). The thief has cached one.
Does the shop owner just not get that check cashed or does American Express eat the check?
I was told that American express somehow alerts the business world that certain number checks are bad. How? How could they do this. i have never had a Traveler’s Cheque checked before cashing it.
I guess what I don’t get is how this equals a solid profit? I know I paid 1% to get the cheques, but if I loose just one and American Express eats the cost, they lose money.
Another person told me that American Express makes its money because a lot of people don’t cash their unused cheques. That sound like pure bunk to me.
I await your brilliant words.
I only know something about #3 and #4. The two are related I believe. There are a lot of unused checks around. Also remember that in addition to your service charge, you’ve already paid American Express for the check. They are drawing interest off of it right now. If you come back with one, that interest keeps accruing.
American Express at one point used to tell you to keep some traveler’s checks around your house for “emergencies”. That emergency would be that American Express’ stock price might be dropping.
It’s a much better deal to use an ATM card and pay the service charge. This works in a lot of countries. It’s quite cool to stick your ATM card in a machine somewhere in Germany and watch Deutsche marks come out of the machine. You also get the best exchange rate this way.
I only bring along a small amount of traveler’s checks unless I am going to some place way off the beaten path. They are my “last resort” money.
Ultimately, credit cards are the best way to go provided you don’t max them out.
I agree with BobT, Phy (after all he’s an Oxford man). A lot more people are not going to cash a traveller’s check than are going to lose one.
Yes, American Express will presumable honor both the stolen and the legitimate check. It is definitely in their best interest to keep the shopkeepers happy – if they start treating traveller’s checks with suspicion they will lose a lot more business than they would from covering the bad check. The strongest selling point for the checks is their ready acceptance. I’m guessing they would make an exception if it became obvious that Joe of “Joe’s Bar and Grill” was suddenly getting a rash of stolen checks and was presumably in cahoots with the thieves.
Their alert probably only extends to other American Express offices. They would probably tell you if you were having second thoughts about cashing a check and called the nearest office. “I’ve got a guy here named Sylvia Papadopolous with check #234056. Is that check OK?”
and 4. Answered nicely by BobT. Traveler’s checks are one of the very few financial transactions where you pay someone to lend them money.
As Bob T said, cash machines are a global phenomena now. Travellers checks are almost obsolete. One thing you definitely might want to consider is taking along two cards, though, just in case a cash machine eats or keeps your card just as you are about to leave town.
When we were travelling in and out of Kazakhstan to work we used to carry a lot of cash, sometimes $2500 or more. The Kazakhs implemented a new tax of 1% on all cash declared coming into their country. (Figure that one out. Why would a country discourage people from bringing in cash?) The result? Suddenly all the foreigners coming in would declare zero cash at the airport and, as soon as they got into the city, head for the nearest cash machine.
I travel with two credit cards, hidden in separate places. Saved my trip to Spain where the extremely efficient pickpockets of the Madrid Metro made off with my wallet and bought themselves some very nice clothes.
I didn’t buy a wallet again until my last day of the trip. It was very relaxing knowing that I couldn’t get my wallet stolen again if I didn’t have one.
I did have some traveler’s checks on this trip, but they weren’t stolen.
The idea behind the traveller’s check is that nobody can use it fraudulently, since your real signature is right there.
Even a master forger would have a hard time duplicating your signature to the point that the forgery would look right, even to a casual observer, when sitting side-by-side with the original. This is why they are so manic about having you sign traveller’s checks immediately, before you even walk away from the cashier’s window.
There’s no “alert list” that goes out to merchants. I’ve worked in several places that accepted traveller’s checks, and we never had anything like this. It would be impossible to administer.
I think that the merchant takes a lot of the responsibility. My employers were pretty strict about comparing the signatures before accepting the check. I guess the risk is offset by the extra sales that are expected by accepting this form of payment.
Still, I imagine Pluto is correct in thinking that AE doesn’t want the merchants to feel too exposed, lest they ditch the idea of accepting traveller’s checks altogether. AE must have a delicate balancing act to do here.
A word of warning (I saw this on the TV news, so it has to be true). The T.C. says something on it to the effect that you have to be careful what you do with it so it doesn’t get stolen. In the case I saw (as best as I can remember. It was a while ago.) the person had them in his backpack, and accidentally left the backpack somewhere, and they were gone when he got his backpack back, and AMEX claimed he wasn’t careful enough with them, and wouldn’t cover them. I don’t know how it eventually turned out. Something to keep in mind, anyway.
A very small hijack (which – if you’ll indulge me – I’ll compensate you for with a very cool piece of travelers’ check trivia)…
You sign the checks when you get 'em, right? Then you sign them again right in front of the merchant, right? If the sigs match, everything should be legit. All in all, a very clever (though admittedly not utterly foolproof) way to discourage check theft/fraud.
So why do so many bozo merchants want to see ID? I’ve always argued (usually to some indifferent minimum-wage cashier) that if I can match the signature the check is good as gold, so honor it. Is this the policy of the TC companies, or just a stupid, misapplied retail business practice?
Okay here’s my trivia (gee, I hope this isn’t common knowledge or I’m gonna look foolish)…
Fast way to tell if a TC isn’t counterfeit: on the reverse are two identical (or mirror, I forget) images; wet your finger; run it over each of the images; one will smear, the other won’t.