What Are The Different Types Of Letters Of Credit?

types of LC

What Are The Different Types Of Letters Of Credit?

Several different types of letters of credit (LC) is commonly used in commercial transactions. We are categorizing them based on their intended use.

  1. Commercial,
  2. Export/Import,
  3. Transferable and Non-Transferable,
  4. Revocable and Irrevocable,
  5. Stand-by, Confirmed,
  6. And Unconfirmed,
  7. Revolving,
  8. Back to Back,
  9. Red Clause,
  10. Green clause
  11. Clause, Sight,
  12. Deferred Payment,
  13. And Direct Pay LC are some of the terms used.

How Many Baninficiers Can Be There In Case Of A Back-to-back Letter Of Credit?

In some instances, the LC may be transferred to more than one-second Beneficiary, providing the LC allows for partial shipping and the aggregate value of sums transferred does not exceed the value of the original LC.

  • When two letters of credit are used to acquire finance for a single transaction, this is known as a back-to-back letter of credit.
  • Back-to-back letters of credit are most often used in overseas transactions, where they may save time and money.
  • These are often used in transactions where a third party acts as an intermediary between the buyer and the vendor.

Read Also About How Many Days Will It Take To Open A Letter Of Credit?

Is There A Cost To A Letter Of Credit?

Some fees are borne by the vendor, while the buyer bears others. For example, one LC management organization advises that for LCs valued at more than $100,000, the average buyer’s charge is 0.75 percent; however, it cautions that the cost might vary from 1.5 percent to 3 percent in developing nations.

Simple Letter Of Credit Form

Date of issue:

Credit Number:


Beneficiary:   The City of Orlando (CITY)

400 South Orange Avenue.

Orlando, Florida 32801


Expiry Date:

On this date, the_______ day of _______, _________,  we hereby issue in your favor this Irrevocable Direct-Pay Letter of Credit (hereinafter referred to as “LETTER”), which is available upon presentation to us at the above address by your sight draft(s) drawn on the ___________Bank, (City)______________, (State)__________-, and accompanied by the following documentation:

An Affidavit from the CITY Engineer, or the CITY Director of Public Works or his designee, that:

________ has failed to construct the improvements and fulfil its obligations in accordance with the development plans and specifications dated he ____________day of_____________ within the time therein specified.

_____________ has, at any time during the performance period as specified in Section 65.551, failed to perform all or any part of the obligations required by the developments plans or specification within the time specified.

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