Types of Letter of Credit
A letter of credit (L/C) is a key financial tool in trade, and it comes in several types. As an apparel exporter, you want to recognise each so you can push for the ones that protect you. They mostly come in safe/risky pairs. Here are the ten.
The ten types (in pairs)
| Type | What it means | Exporter's view |
|---|---|---|
| Import / Export | Same credit, named from each side's perspective | Neutral (just naming) |
| Revocable | Issuing bank can cancel/amend anytime, no consent | ❌ Unsafe |
| Irrevocable | No change/cancel without all parties' consent | ✅ Safe (UCP 600 default) |
| Confirmed | A second bank adds its guarantee to pay | ✅ Extra security |
| Unconfirmed | Only the issuing bank guarantees | Less secure |
| Sight payment | Paid immediately against documents | ✅ Preferred |
| Deferred (usance) | Paid at a set future date | Give to suppliers, don't accept from buyers |
| Transferable | Can be transferred to second beneficiaries | For middleman/triangle trade |
| Non-transferable | Cannot be transferred | - |
| Back-to-back | A second L/C opened on the strength of the first | Intermediary trade / raw-material buying |
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Types of Letter of Credit
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