Letter of credit: Learn what a letter of credit is

Learn what a letter of credit is, how it works, and why it is useful in international trade. Explore the different types of LCs, their advantages and disadvantages, and how to apply for one. Explore what a letter of credit is, its types, parties involved, charges, working process, real example, how to apply, and pros and cons in this complete guide. Discover how different types of letters of credit , like standby and irrevocable, facilitate international trade by ensuring secure payments between buyers and sellers. Letters of credit were introduced to address this by adding a third party like a financial institution into the transaction to mitigate credit risks for exporters. What is a Letter of Credit ? A letter of credit or LC is a written document issued by the importer’s bank (opening bank) on importer’s behalf.