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End of the line for travellers' cheques

Introduced in the 1700s, travellers' cheques have served holidaymakers well. But as they become harder to cash, we look at the modern-day alternatives.

Travellers cheques and passports

They have been around for almost 250 years, but it looks like the days are numbered for travellers' cheques.

HSBC has become the latest bank to warn holders that it will no longer cash them.

Cut-off point

The bank stopped issuing the cheques in April last year and as of 27 June 2014 they are no longer accepted in its branches.

HSBC spokeswoman Melissa Jobson says its decision is "purely to do with a steady decline in demand from our customers over the past few years".

She adds: "In addition to this, spending on credit and debit cards now accounts for an ever greater proportion of customers' overseas expenditure."

Not widely accepted

The other side of the coin is that travellers' cheques are not as widely accepted as they were perhaps 10 or 20 years ago.

Then, they could be readily cashed at hotels, banks and post offices in most tourist destinations.

As Jobson points out, cheques have largely been superseded.

Their original USP was that they could be replaced at little or no cost if lost or stolen, unlike cash.

But now there are numerous alternatives, most of which are much more convenient.

Credit and debit cards

Most of us hold at least one of these, and the growth of the chip-and-PIN system means they can be used pretty much anywhere.

Both types of card can incur substantial fees when they are used abroad, however.

It is therefore a good idea to find out how much each card charges for the likes of cash withdrawals and spending before you set off.

Although credit cards are typically viewed with more suspicion in terms of how much they cost to run, fees for debit card use overseas can be eye-wateringly high.

Some cards impose a £1.50 minimum fee on every transaction, on top of a foreign-use charge of up to 3%.

Certain travel credit cards can be much cheaper, but only if you pay off your debt in full at the earliest opportunity: if not, interest charges can build up.

Prepaid cards

These look like credit or debit cards and operate in the same way.

But prepaid cards, as the name suggests, are designed loaded with foreign currency in advance, which makes them a useful option for travellers who need to stick to a budget.

In this sense, they are a more modern equivalent of the travellers' cheque.

Lorna Gilmour at Sainsbury's Bank says: "We continue to offer our customers the choice of travellers' cheques, although cash continues to be the most popular purchase.

"But our travel money prepaid cards are also popular as they can be easily replaced if lost or stolen and offer the flexibility of re-loading them while abroad and for future holidays."

Usage fees vary, but the cheapest prepaid cards charge no more than the best-value debit or credit cards.

Cut out the middle man

A company called WeSwap is one of the latest innovations in the world of holiday currency.

This is a peer-to-peer foreign exchange service modelled on the likes of Zopa, which allows savers to lend their spare money to borrowers.

WeSwap users from different countries can offer their own currency to each other.

For example, if a Frenchman is planning a trip to London, he would be able to swap with a Brit heading across the Channel.

By cutting out the middle man – the banks in Zopa's case and bureaux de change in WeSwap's – both parties get more favourable rates, in theory at least.

WeSwap charges 1% per transaction, and the firm says this is well below the margins added on by mainstream currency providers.

Accounts are managed online and money is stored on a WeSwap Mastercard, which is a type of prepaid card.

What do you think?

Will you miss travellers' cheques? What is your favoured holiday money option?

We want to hear from you! You can share your views on our message board below. 

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris

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