When the checks are sold the purchaser signs his name in the space provided in the upper left-hand corner. The other spaces in the checks are left blank until occasion arises to cash them.
Letters of Credit and Travelers' Checks Issued by Interior Correspondents The small demand made upon many of the metropolitan banks' out-of-town correspondents for letters of credit and travelers' checks does not warrant the latter in issuing their own and maintaining a special department for that purpose. Such banks avail themselves of the system whereby some big New York bank allows them to keep on hand a supply of its letters of credit and travelers' checks against trust receipt.
Letters of credit sent out in this manner are signed, numbered, and stamped with the limit amount for which they are drawn. The common limits are £200, £300, X5oo, £i,000, and £2,000. When an interior bank issues these letters of credit and travelers' checks it advises the New York bank on blanks sent to it for that purpose, and sends, in case of a letter of credit, its guaranty and specimens of the holder's signature.
The interior banks generally issue these letters of credit and travelers' checks against cash, and the New York bank allows them, say, Iz per cent commission. This commission rate has become the general allowance by the Street.
For the convenience of the numerous members of the American Bankers' Association which do not have accounts with a large reserve city bank having a system of travelers' checks of its own, the association is in agreement with the Bankers Trust Company of New York City for the issue of "American Bankers' Association travelers' cheques." These checks are issued by the Bankers Trust Company to the member bank, which sells them to its customers. The member bank is expected to charge per cent commission. The member bank then advises the Bankers Trust Company of the sale, and remits in New York, Chicago, or St. Louis exchange the face amount of the checks. When the checks are to be used outside the United States a list of correspondents of the Bankers Trust Company is provided for the purchaser. The Bankers Trust Company has supplied every bank (as well as every hotel of any size) in the United States with reduced facsimile specimens of the checks and with instructions as to their encashment; the bankers are instructed to pay the holders the face amount; the checks have been accepted at the time of issue under signature of the Bankers Trust Company.
Arrangements have been made with banks in twenty-four leading cities of the United States to redeem the checks, and the redemp tion banker in each of these cities has notified the other members of the clearing house in his city that the checks may be presented to him for redemption. In a few places these redemption ar rangements do not obviate the necessity of making an exchange charge; in all such cases the face amount of the check is paid to the holder, and the charge is added to the face amount when the checks are forwarded for collection. In all cases where a charge is thus made the items must be sent directly to the Bankers Trust Company for collection with the charges added, Arrangements for encashment arc also made with banks in Canada and abroad.
The interior bank may be content to write letters introducing their applicant customers to the New York bank and may some times offer to guarantee the letter of credit if issued or have the charges made to its account.
Method of Using Letters of Credit Letters of credit are issued in numerical order, and the partic ulars are entered in a "record of letters of credit issued." The letter of credit and travelers' code are enclosed in duplicate in wallets and given to the customer, with instructions to carry the letter of credit and the list of correspondents separately, for if either were lost it could not benefit the finder. If the traveler loses the letter of credit he follows directions on the list of correspondents and advises the issuing bank's correspondent by cable; the New York bank is then cabled by the correspondent immediately for instructions. The instructions may be to stop payment, and they are relayed also to the other London and Paris banks by telegraph and sent to all the correspondents on the list by cable or telegraph. The cost of stopping payment on a letter of credit is between $40 and $so and is charged to the holder or guarantee ing bank.