Payments in international trade

As an example, checks and transfers are usually more risky because they release the payment after the merchandise and documents are handed while letters of credit or bank letters are more reliable as they are supported by the bank chosen by the buyer. However, these last two usually involve higher costs and longer payment times.

The most common payment method nowadays is the setter of credit that constitutes a financial document from the buyer´s bank that involves the promise of payment to the seller conditioned to the arrival of the merchandise and the respective documents according to the terms and conditions established in the contract.

At the same time, a letter of credit could be more secure if it is irrevocable at sight because in that case the bank selected by the buyer has to pay if the exporter compiles with the merchandise and documents handling, while in the case of revocable letters the bank could cancel the payment without notice.

On the other hand, there are other types of letters of credit designed for special needs as continuous operations. That is the case of the revolving letters of credit that renew the promise of payment for other operations.

Finally, the selection of the payment method has to be a result of a detailed analysis of your own needs and the knowledge you have of your business partner. A bad choice could revert into a cease of the payments and the failure of the operation, if not the bankruptcy of the company.