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Traveler's Checks

They may be a travel icon, but millions are leaving home without them as credit cards and other cash alternatives become more popular : Going South?


Tell the truth. Have you been leaving home without them?

Many savvy American travelers have stopped carrying traveler's checks. Millions more are still buying them but using them less. In fact, leading industry experts have quietly arrived at a watershed conclusion: As a consumer tool and icon of American tourism, the traveler's check has reached its twilight years.

"I just think they're doomed. . . . You're giving the company a free loan, the services are no longer necessary and the exchange rate is not competitive," says J. Kimball Dietrich, an associate professor of finance and business economics at the University of Southern California. Dietrich, a frequent traveler throughout Europe, says he hasn't carried a traveler's check for about five years.

"The traveler's check industry has flattened out," says Jack Levine, senior vice president of cash products for Visa USA. "The younger population doesn't even know what a traveler's check is." Visa, Levine says, sold $10.6 billion in traveler's checks last year, down from $12.5 billion the year before.

Now, instead of bringing traveler's checks, many American travelers trust that when large expenses arise or cash needs replenishing, they'll be able to find an automatic teller machine around the corner or a business that takes credit cards, or both.

"The cheapest way to handle money is to . . . go to an ATM to get walking-around money--a minimal amount--and buy everything you can with your charge card," says Rolfe Shellenberger, senior consultant to Runzheimer International travel consultants. "And there are very few places in the world where at least some charge cards aren't accepted."

Since its creation by American Express in 1891, the traveler's check has grown to universal recognition, enduring the arrivals of air travel, television, the computer and the first few decades of the credit card. Last year, an estimated $53 billion in traveler's checks were sold, bearing the brands of American Express, Thomas Cook, Visa, MasterCard and other institutions.

Even now, 23 years since his first televised ad, millions of Americans can close their eyes and summon up the image of Karl Malden warning travelers ominously not to leave home without them.

But now insiders at several levels of the travel and finance industries say the writing is on the wall. At American Express, the world's leading seller of traveler's checks, check sales have been outpaced by the growth of international tourism (see sidebar on page L7).

Credit-card use is burgeoning, even in far-flung and formerly cash-dependent locales such as India. ATMs are proliferating globally and, despite niggling fees, travelers are taking to them. New options involving cards and electronic fund transfers are unveiled weekly.

At the same time, travel authorities say Americans are feeling more and more comfortable in foreign lands and thus less insecure without traveler's checks. And research shows that traveler's check sales are not keeping pace with global increases in business and leisure travel.

"It's not as foreign to go overseas as it was 10 years ago. It doesn't seem as threatening," says Susan Dushane, a travel agent with Travel by Greta in Northridge, who also cites the rise of ATMs. "I haven't taken a traveler's check anywhere in four or five years. I take credit cards and maybe $100 to $200 in cash, stuffed here and there."


The great selling point of traveler's checks has always been peace of mind: their broad acceptance, the chance to replace them if they're lost or stolen, and, especially if the checks are from American Express, the comfort of knowing that money exchanges and other services are possible at about 1,700 American Express offices around the globe.

Millions of travelers take that security to the bank yearly. Officials at the Thomas Cook Group estimate that for every $1,000 in traveler's checks sold, $1 to $2 is refunded to cover a consumer's loss or theft. If that rate holds throughout the industry, that means that means every year, travelers worldwide draw $50 million to $100 million in refunds for lost or stolen checks.

Further, because you pay for traveler's checks upfront, they can help you stay debt-free while other tourists run up credit-card debts at interest rates near 19%--charges that in a few months can wipe out many savings made elsewhere.

But two drawbacks have come to hurt traveler's checks. One is exchange rates. Consumers using credit cards get the best possible rate: preferred institutional rates paid by banks that trade amounts of $1 million or more. A tourist cashing a traveler's check at a currency-exchange office, a hotel or a restaurant can't be sure what rate will be quoted, but it's certain to be worse than the credit-card rate.

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