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.”

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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.

For instance, if you were at the Goring Hotel in London on Sept. 18, your credit-card charge would have been billed at about 64.3 British pence per U.S. dollar. But if you paid by traveler’s checks at the desk, the exchange rate would have been only 58 pence per dollar--a 10% difference.

If you were preparing to visit London and bought traveler’s checks in British pounds at the American Express office on 3rd Street in Los Angeles on the same day, the rate was about 61.5 pence per dollar--still inferior to the credit-card rate, but better than the hotel rate.

A second drawback of traveler’s checks is the hassle. Though American Express has begun selling checks by mail and other firms have taken various steps to simplify the process, travelers typically have to seek out a bank or another institution that issues the checks; pay, in some cases, a 1% fee; sign his or her name 10 or 20 or 40 times; and separate the checks from the receipts. On the road, the traveler is supposed to log each check expenditure (though many don’t bother), find open banks or exchange offices, and shop among them for the best rate.

Runzheimer International’s Shellenberger theorizes that “people who are really emotionally dependent upon the perceived security of traveler’s checks” are likely to remain faithful. “But in a world of ubiquitous plastic, the traveler’s check is probably going to be declining in importance. . . . Canny buyers are going see that this isn’t as good a deal as it used to be.”

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Visa, MasterCard and the rise of invisible money have played a central role in the shift. Visa has added 175 million credit cards to global circulation in the last three years, pushing the worldwide number of cardholders to 386.9 million; MasterCard has added 84 million cards, pushing its total to more than 283 million. Visa has 121.9 million “deposit-access” cards in circulation (also known as debit cards, they allow you to make purchases or withdrawals from your checking account at home) in circulation; MasterCard has 69.5 million. To give their customers around-the-clock, around-the-world ability to get money with these cards, Visa now counts more than 280,000 Plus system ATMs in about 100 countries; MasterCard counts 262,000 Cirrus system ATMs in about 90 countries. And every day marks another increase in the number of businesses worldwide that accept credit cards.

Even among the lowest-priced overseas lodgings, says USC Travel Service Director Ian Thomas, “a lot of student hostels that used to only take cash now take Visa or MasterCard.”

“The future of money is the card,” says MasterCard spokesman Sean Healy, “and the numbers bear that out.”

At the London-based Thomas Cook Group, which runs second to American Express worldwide with more than $20 billion in annual traveler’s check sales, forecasters have seen the coming contraction. Its chief operating officer for financial services, John Hempsey, argues that the product’s promise of security will keep traveler’s checks selling for decades to come, especially among Americans going abroad for the first time. But in the big picture, he sees a long, steady shrinkage and--though he resists these exact words--the end of an era.

Those turning away from traveler’s checks right now, Hempsey says, are most likely to be business travelers on short trips and Americans traveling inside the U.S., either for business or pleasure. As interstate banking gets steadily easier, “domestic use in the USA will probably shrink quite dramatically in a few year’s time,” he adds.

“We’re predicting that by the year 2010, there will probably be $30 billion in traveler’s checks being sold. Obviously that’s less than today,” Hempsey says. (It’s 40% less.) “But $30 billion is still a lot of money.”

Like radio after the advent of TV, Hempsey suggests, the traveler’s check may lose dominance but retain a more specialized role. Several other travel-industry professionals take a similar view.

James Murphy, president of Van Nuys-based Brendan Tours, has for years carried a couple of large-denomination traveler’s checks with him “in case I’m somewhere with a group of 15 people and the world falls in and nobody will accept credit cards.” Though in his travels, he senses that “people are charging everything on their credit cards,” Murphy says he hasn’t yet found something better than the checks as a noncash emergency resource.

Because Americans abroad so far “don’t fully trust automatic teller machines to work,” says Los Angeles-based travel industry consultant Marc Mancini, many U.S. travelers are continuing to buy travelers’ checks in smaller amounts.

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This can’t be happy news for American Express, the leading seller of traveler’s checks. But so far, the company isn’t ready to admit that its product’s best days are behind it.

“There are more payment-instrument options than ever before,” acknowledges American Express spokesman Toby Usnik. “But we do believe that we have a much-loved product and a time-tested product. . . . When we brought out the American Express card [in 1958], people said it was going to be the end of the traveler’s check business. And they’re still going strong.”

From the beginning, American Express executives say, they have suggested that travelers use a combination of payment instruments, generally including traveler’s checks, a credit card, an ATM card, U.S. currency and foreign currency. (Most travel agents continue to offer the same advice.) And the company offers several of those options itself.

American Express had 37.8 million charge cards in global circulation at the beginning of 1996, and that figure continues to rise. Since 1993, cardholders have been able to enroll in ExpressCash, a program that generally allows traveling cardholders to withdraw $300 to $2,500 per week from 121,000 participating ATMs worldwide. (As with cash advances against other cards, those transactions carry fees--usually $2 to $5, occasionally up to $20 for larger amounts.)

Even in such a crowded marketplace, Usnik says, global sales of American Express traveler’s checks have passed $25 billion yearly. The company has added them in 10 foreign currencies, offers traveler’s checks for two (which require two signatures) and sells Global Money Packs, which give consumers a combination of foreign-currency traveler’s checks and cash in up to 21 foreign currencies.

In any event, the travel and finance marketplaces keep changing, and even if the traveler’s check is in decline, it’s unlikely that American Express and its competitors are done jostling for travelers’ trust and money. Just one example is a new Visa product, aimed specifically at vacationers and known as TravelMoney.

The product has not yet been introduced in Southern California, but will work this way: Before embarking on a trip, you go to a participating bank and hand over whatever amount of money you expect to spend on the road. In exchange, you get a secret four-digit personal identification number and a TravelMoney card, which is encoded to keep a running balance of available funds.

When you need money, you find a Plus system ATM and withdraw, gradually reducing your balance. Automatically, dollars are translated into local currency at the same advantageous bank rate that credit-card users get. If you lose the card, it’s worthless to anyone else without your PIN number. (Banks will be free to charge commissions when selling the cards and transaction fees for each time you draw down the card’s balance. Rates may vary by bank.)

TravelMoney will mimic a traveler’s check by offering security and letting a tourist set aside a budgeted amount of travel funds, but also in the way it makes money for its sellers. As the traveler wanders from city to city, Visa will earn interest on the money that was set aside before the trip began.

Not surprisingly, Visa’s rivals over at American Express are already tossing rocks at their competitor’s new product.

Since the TravelMoney card works only with ATMs and not with retailers, says American Express’ Usnik, travelers will once again find themselves carrying currency.

“That’s muggable cash,” Usnik says. “So where’s the peace of mind?”

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Pros and Cons of Traveler’s Checks

PRO:

Widely accepted.

Can be replaced if lost or stolen.

No interest charges.

No hunting for ATMs.

Allow you to budget money/limit spending.

CON:

Often trade at poor exchange rates or require commission.

Inconvenience of trip to bank/exchange office.

May carry purchase charge.

Require record-keeping.

Signing/re-signing all those checks!