letter of credit

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Related to Commercial letters of credit: Revocable letter of credit, Irrevocable Letters of Credit

letter of credit:

see credit, letter ofcredit, letter of,
commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer.
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credit, letter of,

commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer. The document is called a circular letter of credit when it is not addressed to any particular correspondent. In effect, a letter of credit is a draftdraft,
in banking, order by one party to another party to pay a stated sum to the person or firm in whose favor the draft is made. It is similar in form to the ordinary bank check. Often the drawer and the drawee of a draft are the same person.
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, save that the amount is merely stated as a maximum not to be exceeded. Letters of credit, mainly used by travelers, greatly simplify nonlocal business transactions. Those who issue such letters are usually so well known that any bank will honor the letter upon proper identification. Travelers' checks are a modified form of a letter of credit. They are issued in coupons, upon whose face a value is usually expressed in terms of the currency of a particular country. In the United States they are issued by express companies and banks. Circular letters of credit require that each payment, as it is made, be endorsed by the firm making payment so that other banks may know how much of the total credit has been used.
References in periodicals archive ?
None of the explanations qualifies as a general, unified explanation for all of the transactions in which businesses use commercial letters of credit.
Sixty to 80 percent of drawings presented under commercial letters of credit contain discrepancies, yet only about one in a thousand gets refused.
The credit facility provides for up to $50 million in term loans, a $15 million revolving credit facility, $10 million in commercial letters of credit and $30 million in standby letters of credit.
From their modest beginnings in the '50s as an appendage of commercial letters of credit, standbys have evolved into a workhorse of commerce and finance.
GBCIB specializes in international banking, including various lending programs as well as operational activities including Commercial Letters of Credit transactions, documentary collections and international payments.

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