Traveler's Check

Ancient relic time. These things used to be a big deal in the ‘70s before credit cards where pretty much everywhere, including Somalia. Those who traveled wanted security that, if they went to some remote island, they wouldn’t run out of cash and not be able to get home. And the banks, along with American Express, fanned the flames of this fear with endless TV commercials showing stranded families doing the dishes, kidnapped by unscrupulous hotel owners.

How’d it work? Well, you’d go to a U.S. bank, write them a check out of your account for, say, $500 to buy a book of, say, 10 x $50 checks. Amex guaranteed that they’d be accepted anywhere. The bearer or person who had them had to sign the back, often no ID required. And then the person taking them would take them to a bank and get paid. Fees were deducted on both sides, so you’d actually pay more like $520 for that book. And when the checks were redeemed, the merchant got more like $480.

So, in volume, the spreads were huge for the bank…like a subprime credit card. And yes, every now and then, the book of checks would be stolen as well. The bank would stop payment (if you could find a phone and call them and remember your serial numbers). And then the vacation would be fondly remembered, instead of as a vehicle to teach the washing of dishes until Uncle Larry came along to rescue you in his biplane.