A Business Encyclopedia

Traveler’s Cheque

Definition: The Traveler’s cheque is an exchange medium that can be used as a substitute for the hard currency. As the name suggests, these cheques are issued to the individuals who travel on vacations to overseas.

The Traveler’s cheque provides a lot of convenience to those who travel to foreign countries, as they are not required to carry excess cash along with them and can use these cheques as a currency to facilitate the purchases. The merchants and other business accept the traveler’s cheque as a currency, provided the original signatures on the cheque (the cheque signed at the time of its issue) matches the signature done at the time purchases are initiated.

Here, the issuer of the Traveler’s cheque unconditionally guarantees the payment of the undersigned value, irrespective of the cheque being fraudulently issued or lost or stolen. This means that the traveler’s cheques are never bounced unless the issuer becomes bankrupt or goes out of business. The payee receiving the cheque, can deposit it with the Bank, as done in the case of ordinary cheques and can get the payment credited to his account.

One of the advantages of traveler’s cheque is that it never expires, this means, the purchaser can keep the unused cheque with him to use it anytime in the future. There are four parties involved in the Traveler’s cheque transaction:

  • The Issuer or Obligor, an organization that produces the traveler’s cheque
  • An Agent, the bank or any other party that sells the cheque
  • The Purchaser, the person who buys it
  • The Payee or Merchant, a person to whom the cheque is handed over in exchange for goods and services.

The Traveler’s cheque can be replaced by the issuer, in case it is lost or stolen. This requires the purchaser of the cheque to maintain a copy of cheque receipt or its number in a safe custody so that it can be produced to the issuer to get the cheque replaced. The traveler’s cheques are available in varied currencies such as US Dollars, Great Britain Pounds (GBP), Japanese Yen (JY), Australian Dollars (AUD) and Canadian Dollars (CAD).

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