Popular International Payment Methods
BlogDate: 10-10-2023 by: Nhu Quynh
When negotiating international payment methods, both parties always want to choose the most beneficial payment method for themselves. In this article, we will learn about international payment methods currently applied to best ensure our interests in steel business activities.
1. Payment method T/T
1.1 What is T/T payment?
T/T payment (also known as Telegraphic Transfer) is a payment method whereby the bank transfers a certain amount of money to the steel exporter by means of money transfer (Swift or Telex telegram) on the basis of only the importer's instructions.
T/T payments are one of the most popular payment methods today. This method is widely used because of its convenience in purchasing and selling activities and is often suitable for contracts of small value where the two partners trust each other and have a long time to buy and sell.
1.2 Characteristics of T/T payment method
Currently, T/T payment method has 2 forms of money transfer:
- Telegraphic Transfer Remittance (TTR): The steel importer pays an amount of money in advance to the exporter before delivery.
- Post shipment (TT after shipment): is the steel importer paying money to the exporter after receiving the goods.
2. Payment method L/C
2.1 What is L/C payment?
L/C payment (also known as Letter of Credit) is a popular form of international payment today. This is a method of transferring payment responsibility from the steel importer to the bank to ensure the exporter delivers and receives payment safely and quickly and the importer receives a shipping invoice on time. Therefore, to a certain extent, L/C is a payment method that balances the interests of both exporting and importing parties and resolves conflicts of distrust between both parties.
Thus, the bank is obliged to pay the steel exporter when they present documents in accordance with the terms and conditions specified in the L/C. The bank is not allowed to refuse payment because the buyer has not received the goods if the documents presented by the seller comply with the terms and conditions specified in the L/C.
2.2 Characteristics of L/C payment method
Currently, there are 4 most popular types of L/C payment methods:
- Revocable L/C: This is a type of letter of credit that, once opened, can be supplemented, corrected, or canceled unilaterally.
Irrevocable L/C: This is a type of letter of credit that, once opened, can only be amended, supplemented, or canceled by the bank according to the agreement of all parties involved. In international trade, this letter of credit is the most commonly used.
Confirmed irrevocable L/C: Is an irrevocable letter of credit, guaranteed by another bank to pay at the request of the bank opening the letter of credit.
Transferable L/C: An irrevocable letter of credit that stipulates the right of the paying bank to pay all or part of the letter to one or more people according to the order of the first beneficiary.
From the nature of the L/C payment method, it can be inferred:
First, only credit institutions have the right to perform these transactions.
Second, due to the monopoly of banks, this payment transaction can only be regularly performed by credit institutions.
Above is basic information about two types of international payments commonly used today. If you need more information about the above two payment methods, please contact us here.