I am reading about Benjamin Franklin. He spent ten years living in London while working as an agent for the colonies. He then spent nine years in France while working as Ambassador to France and securing the alliance that would ultimately turn the tide of the war.
I know that Franklin was very wealthy during this time of his life, but he made his money primarily through printing in America. When he traveled to a place like London to stay an indefinite amount of time, how much money would he bring with him to cover his expenses? How would he get more money if he needed it (obviously send for it, but what would this entail?)?
If you think about it, if a French buyer ordered something from Philadelphia, how was the merchant to know the buyer was going to pay for it, when it arrived? And likewise, if the buyer sent actual money, how would he know that the merchant would actually send the goods? There was also the problem of simply the danger and inconvenience of trying to haul a mountain of money around when traveling. The solution was to have a third party involved, who would hold the money. This could be another merchant, but mostly it was a bank. Franklin would have simply been able to hand a merchant , say, 500 francs in Philadelphia, and the merchant would give him a note directing the merchant's business or bank in Paris to give Franklin the money. This letter of credit would not take up much room on the ship, and if it were specifically made out to Franklin, it would be reasonably useless for a pirate to take.
If this seems to resemble a check, you're right. Like checks, letters of credit were handled by established, safe institutions like banks, Quaker merchants, and the like. But imagine if you could not only write checks on a bank, but on yourself. Personal notes were also used often in 18th century- if Harold owed your $10 and gave you a note for it, and you owed John $10, you could give him Harold's note in payment. Now, John might only want to give you $7 credit for a note on Harold...might give you a full $10 for a note from George Washington.
There are many complexities to this- bills of exchange, the market in notes and letters of credit- but this is the basic structure. What specific merchant Franklin used, I don't know.
EDIT many people have pointed out that letters of credit still exist in international business.
There were 3 types of money in colonial times.
Commodity items have value in themselves, to directly trade/barter. Typical high value and easily transportable items included metals, tools and nails, tobacco, pelts/skins, spices, alcohol, wampum, ammunition, food, anything really.
A quick example is the Hudson Bay Company who used beaver pelts as their standard currency. Here's some example values:
These commodities were the most robust currency for travelers, because they had at least some value everywhere, regardless of the country, port, or remoteness to civilized development. Expeditions (such as Lewis and Clark, or Columbus) carried loads of diverse items for this bartering purpose.
Coins had fluctuating value in the colonies and across the globe, but made from precious metals held at least 'some' value. Their valuation/exchange rates varied widely, even from state to state - and certainly across Europe. Most of the US's original coins, initially obeying the British pound/pence/shilling system, were typically Spanish or Portuguese origin - in fact the silver Spanish Dollar aka piece-of-eight, was so common and prolific that the US used 'dollar' for our own currency decades later. These coins had direct value being gold and silver, Franklin or others making trips would've brought a coffer of these coins with them when traveling for incidental, daily, or emergency use.
Paper Money was used to allow facilitating transactions easier, perfect for day-to-day use, but was highly localized. In the US Colonies, each printed and guaranteed their own scrip, and their values and exchange rates ranged greatly. Some currencies were basically IOU's and some had gold and value 'backing' it. Once the Revolution spun up this paper money became essentially worthless. In Europe and elsewhere, paper money was also used, and bit more stable, but it was not used for international trade.
Regarding Franklin specifically, he was a BIG fan of paper currency, and wrote a good bit of praise including his analytical "A Modest Enquiry into the Nature and Necessity of a Paper Currency in 1729".
When he traveled however, he was basically 'hosted' with colleagues and patrons, and during this time there was a strong reliance on credit, and all sorts of banks, loans, and financial instruments that allowed those with good reputation or wealth like Franklin to simply live on credit, to pay later. Through his time in Europe he regularly had streams of goods of all sorts like alcohol and tobacco shipped, and he was a generous man.
sources:
This may not be acceptable because the source is historical fiction, but it's historical historical fiction: Walter Scott's novel "Rob Roy". Written 1817, before trains or telegraphs.
The book starts out set in early 1700s England, and the narrator is a merchant's son. So there's a lot of trade talk at the start. Including something that becomes critical to the plot: bills of trade.
A "bill" was essentially a transferable IOU that functioned like a cheque payable to the bearer, and usually was valid at some point in the future. When the date was up you brought it to the original issuer who was obliged to honor it in cash. Failing to honor the bill would result in serious legal consequences possibly including jail.
These work just fine for being sent through the post, although very high value ones would be sent with a courier; and it's just such a courier having his chest full of bills stolen that kicks off the quest of the narrator to get them back and repair his credit.
At one point while in rural Northumberland he recieves a letter from his father enclosing a bill for fifty guineas "drawn on a Newcastle goldsmith"; given a guinea is a quarter oz gold coin, that's about $10k in today's money. He is able to take this to a local merchant he's never met and swap it for physical cash.
Actually, I've just found a much better source, Franklin himself (search for 'salary'): https://archive.org/stream/templefranklin02franrich/templefranklin02franrich_djvu.txt
"Sunday 1 6th I heard nothing from Versailles. I received a letter from Mr. Adams acquainting me he had drawn upon me for a quarter s salary, which he hoped would be the last, as he now found himself in a way of getting some money there, though not much"
So it seems that Franklin was in fact paying the salary of John Adams, and this was done with the paper-based honor system: Adams took out a debt with someone (probably his landlord) and asserted that Franklin was good for it, and Franklin paid the bill when it arrived at him.
The honor system sounds ridiculously gameable, but since the world was much smaller, honor only applied among high society, and breaches of honor were deadly serious, it worked quite well.