How Documentary Credits Work

What is a Documentary Credit?

In basic terms, a Documentary Credit (DC) is an undertaking by a bank to make payment, provided the terms of the DC are met. There are several types of DC – the main difference is that some are more suited to transactions involving middlemen or traders.

Revocable or irrevocable?

DCs can be irrevocable or revocable. With a revocable DC, the buyer can change or cancel it after issuance. You should always insist on an irrevocable DC so that it can’t be cancelled without your consent.

Trade Finance

An export DC makes it easier to obtain pre-shipment finance in the form of a packing credit, or post-shipment finance where the documents under the DC are negotiated.

Different types of DC

• Import DC
• Transferable DC
• Back-to-back DC
• Standby DC
• Transferred DC

Which DC is right for you?

• DC Comparision Table