Letter of Credit

Introduction to Letters of Credit

Methods of Payment

How many payment methods are there in our Global Business Centre?

Methods of Payment in the Global Business Centre.

There are 4 methods of payment in Global Trade.

1. Payment in Advance

2. Open Account

3. Documentary Collections

4. Documentary Credits.

Let's look at the above diagram closely.

Payment in Advance - For Outward Transfer, you will do a Sales of Exchange. For an Inward Transfer, you will do a Purchase of Exchange.

Open Account - For Outward Transfer, you will do a Sales of Exchange. For and Inward Transfer, you will do a Purchase of Exchange.

Documentary Collections - For a Collection Inwards, you will do a Sales of Exchange. For a Collection Outwards, you will do a Purchase of Exchange.

Documentary Credits - For an Import Letter of Credit, you will do a Sales of Exchange. For an Export Letter of Credit, you will do a Purchase of Exchange.




  • There are 5 methods of payment in our Global Business Centre.
  • There are 4 methods of payment in our Global Business Centre.

What is a sales of exchange and a purchase of exchange?

Sales of Exchange

The sale of foreign currency by a bank to a client.

Purchase of Exchange

The purchase of foreign currency from a client by a bank.

What is a Sales of Exchange?

  • A sales of exchange is when the client sells foreign currency to the bank.
  • A sales of exchange is when the bank sells foreign currency to a client.
  • A sales of exchange is when clients can swop foreign currency between each other.

What is a letter of credit?

Letters of Credit

What is a Letter of Credit?

The Cycle of a Letter of Credit

The definition of a letter of credit.

A letter of credit can simply be defined as a "Conditional undertaking of payment, between the Importer’s Bank (Issuing Bank) and the Exporter, provided all the terms and conditions specified in the credit are met."

Which party will initiate the Letter of Credit?

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