Traveler's Checks vs. Cashier's Checks

Traveler's checks and cashier's checks are both financial instruments designed to afford special protection to either the person writing the check, the person cashing the check or both. Each has benefits and limitations. Knowing a little about each will help you decide which is appropriate for your needs.

Cashier's checks are designed to process quickly because they are guaranteed by the issuing bank, and thus protect the recipient. They are pre-printed and signed by a bank official rather than the account holder, so they are accepted and processed more readily than a personal check.

The benefits of a cashier's check are the quick processing and the added security offered by the pre-printing. The limitations are that banks often charge a fee for each cashier's check, and that since the check is pre-printed, you can't have them made out for travel and then write them out anywhere.

You use a cashier's check for a specific, usually domestic purchase because you need the check to process quickly, because it's a large amount of money so you want the check pre-printed for additional security, or because the seller wants extra assurance that the check is good, which is often the case for major items such as automobiles.

Traveler's checks are designed to provide convenience and security to the person paying with the check. Traveler's checks are accepted around the world and they can be replaced if they are lost or stolen.

The security features are twofold. First, you sign the checks while you are still at your bank to establish what your signature looks like; the checks aren't usable until you fill out the second signature box in the presence of the payee. Second, the checks are not printed with your account number on them, so if they are stolen, the thief still does not know your bank account number.

The limitations of traveler's checks are that they are less widely accepted than they once were, and they must be pre-purchased in specific currency, such as U.S. dollars or British pounds, for instance.

You use a traveler's check when you are out of town -- usually out of the country -- because you're in a place where your personal check will not be accepted, and you don't want to carry a large amount of cash which can be lost or stolen.

Traveler's checks were created long before the proliferation of credit and debit cards. Many travel experts, including Rick Steves, recommend using credit cards, debit cards or a combination of both instead of traveler's checks, especially given the protections against theft and fraud offered by credit card companies today.