Letter of credit

How it is used

Short form L/C or LC; also called a documentary credit. The buyer asks its bank to open or issue the L/C; the seller checks it, may ask for an amendment and later presents the documents. Most L/Cs follow the ICC rules known as UCP 600.

Example sentences

1. Our customer has opened an irrevocable letter of credit at sight for USD 240,000.

2. Check the letter of credit carefully; the latest shipment date is only ten days away.

Common collocations

• open a letter of credit
• letter of credit at sight
• amend a letter of credit
• confirmed letter of credit
• present documents under a letter of credit

Related terms

• issuing bankThe buyer's bank that opens a letter of credit and gives its own promise to pay if the seller presents complying documents.
• beneficiaryThe person or company that will receive the money under a letter of credit, guarantee or bank transfer; in trade it is usually the exporter.
• discrepancyA difference between the documents presented and the terms of a letter of credit, or between the documents themselves, that gives the bank a reason to refuse payment.
• UCP 600Uniform Customs and Practice for Documentary Credits: the ICC rules, in force since 2007, that most banks use for issuing and handling letters of credit.
• irrevocableDescribes a promise, such as a letter of credit, that cannot be changed or cancelled without the agreement of all the parties concerned.

This word in other fields

The same English word can have a different meaning in another field:

• letter of credit · Finance & Banking

More terms: Payment Methods and Letters of Credit

• payment terms
• advance payment
• documentary collection
• cash against documents
• open account
• telegraphic transfer
• advising bank
• confirming bank
• applicant