For Travelers, Checks Better Than Money

The benefit of travelers checks is not that they’re a substitute for money, but an improvement. They can be negotiated anywhere but cannot be lost irretrievably: The company that issued them will replace them.

Thus they’re the perfect “vacation travel product,” in the words of Tom Cash, senior vice president at American Express, the largest travelers check issuer. Backed by sure money in a bank, they’re acceptable to merchants who won’t accept personal checks or certain credit cards. And they’re replaceable: “If it’s cash that disappears, you’re out,” says John Watanabe, customer services manager for Bank of America’s BA Cheque Corp. “And if you lose a credit card, you may not get immediate replacement.”

Whatever the brand, all travelers checks work the same way. The issuing company sells its checks through banks, savings and loans, and organizations such as auto clubs, paying them a fee for handling the brand and providing a network of agents and outlets to handle refunds and replacements. They make their money from the “float,” or interest they earn on the purchaser’s money for the time they have it--an average of 45 to 60 days from purchase to redemption.

Obviously, volume is the game, and it goes to a handful of big issuers, led by American Express (which sold $23 billion worth of checks last year), Bank of America, Thomas Cook and Citicorp. The issuer handles the money and ultimate redemption, and may also provide the network for payment and replacement. Some, however, issue checks provided by Visa or MasterCard, using their networks of members to handle such services. A further complication: Banks can also sell Citicorp Visa checks, or Bank of America Visa and MasterCard checks--often with their own name on them as well--and have none of the issuer’s responsibility of either service or administration.

Big-Brand Acceptability

Never mind the confusion of names and responsibilities. Many consumers simply take whatever their bank offers. Some banks charge buyers 1% or 2% of the amount purchased; more make do with what the issuer pays them, offering the checks free to account holders. Even American Express checks are free two-thirds of the time--except, ironically, at American Express offices, where there’s usually a 1% charge.

In fact, there’s little difference: $50 is $50, whatever the logo. Some companies offer checks in pounds, marks, yen and other currencies--helpful to people spending considerable time in one place. But vacationers are “typically traveling to more than one country,” says Gordon de Lang, senior vice president of sales and marketing for BA Cheque Corp., “and you can relate more easily to the value of something in your own currency.”

Some offer “enhancements,” often of dubious benefit--Citicorp’s hot line, for example, offering referrals to English-speaking doctors and lawyers for 45 days after purchase, or B of A’s hot line dispensing information about things such as inoculations and visas. B of A check buyers can also join a “SafeTravel Network” ($8.50 per person) offering referrals to doctors, lawyers, translators, embassies and consulates, plus several incidental insurance products ($1,000 in emergency hospital payments, $200 a day for trip delays)--all for later reimbursement, not on-the-spot help while traveling.

The big brands all enjoy the same “acceptability,” with some edge to American Express, probably known even in the deepest jungle. By contrast, credit cards, says De Lang, are “accepted only at merchants which have a relationship with that credit card company.” Automated teller machine cards and the growing ATM networks are another matter: This past decade, they’ve significantly shrunk sales of travelers checks to Americans traveling within the United States, says De Lang, making travelers checks more a product now for travelers going abroad.

Similarly, all brands promise replacement (“refundability” in the trade). The question is how easy it is to get the replacement, but as with insurance, the purchaser has no idea how claims are handled until he makes one.

All losses should be covered, “even if the checks aren’t lost but were left at home,” says Cash. Generally, he says, half are thefts and half “losses in which people aren’t sure what happened”--they might have left the checks somewhere or been the victim of a good pickpocket.

Most require only that customers sign the checks at time of purchase, and not countersign until the checks are used. They also suggest keeping a list of check numbers and a copy of the purchase receipt in at least two handy places.

Verifying Numbers

When checks are lost--and only a small percentage of travelers checks are--the customer is supposed to report it immediately, usually by phone. Most companies provide with their checks a list of phone numbers, by country, to call toll-free or collect.

Most companies want the lost check numbers (which are specific to company and place purchased), and the date and place of purchase, so they can check, usually by computer, says Watanabe, “that the numbers are legitimate.” Without those numbers, the date and place of purchase is enough to verify the transaction by computer, but it naturally takes longer. The company can then authorize replacement, within minutes or a few hours, and tell the customer where to go.

It might be a bank, currency exchange, auto club or rental car office, perhaps a hotel if the replacement is needed after business hours; the big companies promise seven-day, 24-hour service. Citicorp boasts 85,000 outlets in 180 countries, MasterCard 170,000, and American Express 150,000, including 1,500 American Express offices and a network of airport ATMs.

Such numbers and promises could be meaningless, of course. “It’s not the number of places that counts,” says Stephen Halliday, vice president of Thomas Cook in Princeton, N.J., which issues a MasterCard travelers check, “but the quality and responsiveness.”

“The important thing,” says Cash, “is that people are usually traveling on vacation, which they planned and saved for, and they don’t want to spend valuable time trekking around for a refund. We want to take care of them.”