Introduction To Credit Letters
Credit letters are nothing but those letters that are written by the bank which ensure the integrity and the honesty of the party that is making the purchase and also the selling party. The person who is selling the goods promises that he will meet all the terms and the conditions that are covered in the credit letter. The bank, which represents the purchaser, makes a promise in return to make the full amount payment that is owed for all the goods.
A credit letter has some guidelines which usually give an outline to the contents of the letter. It is these guidelines which help in determining all the conditions and the terms that are made by the seller, the bank and the buyer in the trading and negotiation process.
There are various types of credit letters like Standby Letter of Credit; this letter makes a promise to the seller that the payment will be made only after the goods are delivered. This kind of letter is more like a reassurance compared to the original credit letter.
There are other types of credit letters also like Credit repair letter, credit dispute letter, transferable letter of credit, commercial letter of credit etc..