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Kevin J. Berk

Kevin Berk

Archive for April, 2009

Interest bearing travelers checks

Thursday, April 30, 2009
posted by admin

So this idea was originally conceived by my father, Jay Berk.  The idea came from the fact that he would purchase travelers checks prior to a trip, but when he returned he would not redeem them, he would just put them in his safe.

Not a great use of the asset and in fact, back in 1990 the float (the amount of money that the issuer had use of on a daily basis) was $4.4 Billion.

I took this idea to a different level and tried to get the U.S. Government (the Bureau of Public Debt) to get into the business and start to offer a U.S. Travelers check, but they would not encroach on the private sector.

I then took the idea to AMEX who told me that one other person had come up with the idea, but they could not see the value in offering interest on an instrument that they did not need to pay interest on at that time.  Well, my feeling and analysis suggested that a much higher % of the population would have used Travelers Checks if there was a real value to do so.  Remember, what happens if you lose or your Travelers Checks gets stolen, they get replaced.  People could literally put their money under their mattress without the fear that someone could steal it, hell staple it to your shirt :-).

So how do you monetize the concept:

1.  Charge a higher % upfront

2.  Maintain a mandatory grace period of 15 days, i.e. interest does not accrue until after 15 days.  This way if the people are purchasing the checks for a short trip they will not earn interest.  So for these 15 days, no interest is owed to the buyer and the bank would keep 100% of the float.

3.  Disparity between money being loaned at x%, while you pay only y%.