Archive Pages Design$type=blogging

Differences Between Cash Against Document & Letter of Credit

Letters of credit  (l/c) and  cash against documents  (documentary collections, cad) are the most frequently used payment methods in int...

Letters of credit (l/c) and cash against documents (documentary collections, cad) are the most frequently used payment methods in international trade. Their combined share is more than 50% in all trade finance practices. Letters of credit and cash against documents have some similarities. We can distinguish some common points of these two payment methods as follows : Both payment methods are executed by banks, documents play a key role, they are governed by internationally accepted rules etc. Despite these similarities they have some differences as well. On this article I would like to identify the main differences between Letters of credit (l/c) and cash against documents (documentary collections, cad).

What are the main differences between cash against documents vs letters of credit?

Let us examine the differences between these two important payment methods of international trade article by article below. 

  • Governing Rules : Letters of credit transactions are governed by UCP 600 and cash against documents are governed by URC 522 rules. You can get detailed information regarding these two set of rules by reading my articles.
  • Transaction Flow : Letters of credit are opened by the issuing banks with the request and authorization which they have received from the applicants. Applicant is the importer in a commercial letter of credit. As a result letters of credit are initiated by the importers. On the other hand, cash against documents or documentary collections as we called them in trade finance are initiated by the exporters.
Letter of Credit Transaction
  • hover_share
    Cash Against Documents Transaction
    Risk Degree : Letters of credit give more assurance to the exporters than cash against documents for this reason letters of credit accepted as a more secure payment methods in international trade than documentary collections.  
  • Responsibilities of Banks : Banks play a key role in letters of credit transactions and they have high levels of responsibilities against exporters. On the other hand in documentary collections banks have almost no valid responsibilities against exporters. As an example banks do not control the documents in documentary collections but in documentary credit transactions banks check the documents to determine whether the presentation is complying or not.
  • Complexity : Documentary collections are much more easy in operational perspective than documentary credits. 
Cost : The cost of the documentary collections is less than the cost of the documentary credits. Letters of credit are one of the most expensive payment methods in international trade.

Connect With Us


2017 3 Stoogies 4kids Action Adventure Alison Android Android Apps Android Games Animation Ant-Ageing Apple Apps Art astronomy Baahubali Basic Electronics Batman BBC Beginners Bible Bilderberg Group biology Block Diagram Blogging BlueJ Books BoomBeach Brand Business CAD Call Of Duty Cement chemistry Christian Bale Clan Wars Clash of Clans Clash Royale CoC Coinsrewarder collaborations Collections Comedy Comedy Heist Componets Computer Conspiracy Conspiracy Theories Conspiracy Theory Cooking Coursera Cowboy Craft Crime DAP Digg Discovery Channel Documentary Documentary Collections Download Drama earn Earn from home Earning Online Education edX Electronics EngagemeTV Entertainment Example Facts Family Fantasy Fashion Food Free Free Course Freebies Freemasons Functions Gadgets Gaming geography George Clooney Ghost Giants Guide haunting Health Historical drama History Horror Comedy Hugh Jackman i ICC Illusion India Instagram International Trade Intrigue iPad James Bond Khan Academy kids La La Land Lastfm learning Letters Of Credit Lifestyle LinkedIn Logan martial arts mashups mathematics maths Media Mobile Mobile Downloads Motivational Movies Mr. Bean murder Music Musical Drama Must Watch Myspace Mystery MYSTERY & INTRIGUE Nephilim Niche NPK Offers Ohm's Law OneAd opportunity Overview Parallel Circuit paranormal Parenting PC PC Downloads Pc Games Performances Photography physical training physics PLR Programming Rankings Raw Cashew Nuts Recipe Requirements Review Reviews Risks Romance Rules SBLC Sci- fi Sci-Fi Secret Societies serial killer Series Series Circuit Share Market Share Trading sites Social Soundcloud Spaghetti Westerns special report Specifications Spirititual SPOOFS sprituality Squidoo Stock Market Stock Trading story StumbleUpon Sugar Super Hero Super Heroes SWIFT Symbols Technology Thirukkural Thriller Tips & Tricks Tom Hanks Top 10 top 9 Tourism Town Hall Trailer Travel Trilogies tutorial TV Twitter UCP UCR Udemy Unboxing Under 30 Urea Video Vidya vox Virus Visual illusion war Yahoo Answers Youtube
World Networks: Differences Between Cash Against Document & Letter of Credit
Differences Between Cash Against Document & Letter of Credit
World Networks
Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago