Letter of Credit for Exporters: When It Makes Sense
When a Letter of Credit is worth its cost and effort for an exporter, and when another payment method fits better.
Reviewed by LCCheck team (owner-approved) · 2026-10-12
Short answer
A Letter of Credit makes sense for exporters when the buyer is new or its credit is uncertain, the order is large, or the buyer's country carries political or transfer risk. It costs fees and document effort, and protects only if documents comply; for trusted repeat buyers, open account or documentary collection may be cheaper.
| Best for | New buyers, large orders, higher-risk markets |
|---|---|
| Main cost | Bank fees + document discipline |
| Add confirmation when | Issuing bank or country risk is a concern |
Good fit
- First orders with a new buyer.
- Buyer's bank is strong but buyer is unknown.
- Markets with payment transfer risk.
Weaker fit
- Small or frequent orders with trusted buyers.
- Terms you cannot meet in documents.
- Short timelines that leave no room to prepare documents.
Make it work
- Review the draft before issuance.
- Present compliant documents first time.
Sources
- ICC — UCP 600 (Uniform Customs and Practice for Documentary Credits)
- US International Trade Administration — Letters of Credit
General guidance, not legal advice. Your bank examines documents independently.
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