Letter Of Credit Explained: How Banks Secure Payments In International Trade And Protect Buyers And Sellers

International trade often involves buyers and sellers operating in different countries, with neither party necessarily having an established relationship with the other. That can create uncertainty around payment and delivery. A Letter of Credit , or LC, provides a structured banking mechanism in which payment is made subject to specified conditions and documents. It can therefore offer sellers greater payment assurance while giving buyers a defined framework for the transaction.