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Common Payment Methods used in International Trade


List of payment terminologies commonly used in international trade:

T/T (Telegraphic Transfer): It means electronic transfer or wire transfer of funds overseas through banks. It usually takes 3-5 days to transfer the amount to sellers account globally.

Escrow: Escrow is a most common payment method used for both buyers and sellers protection globally. In this method buyer delivered the payment to a third party that usually called an escrow agent to hold the amount until buyer received the order in agreed-upon conditions. Where as the escrow agent will delivered the payment to the seller.

L/C (Letter of Credit): In this method a letter issued by a bank authorizing the bearer to draw a stated amount of money from that particular bank, its branches, or other associated banks.

In other words L/C is a guarantee, given by the buyer\'s bank, that they will pay for the goods exported, provided that the exporter can provide a given set of documents in accordance with clauses specified in the L/C and in a timely manner.

Cash in Advance: In this method buyer has to pay upfront cash to the seller before shipment. Considering that buyer is on 100% risk in this mode of payment.

Posted by: Saty on Feb 10 2012

Tags: Business

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