## Introduction Payment security is crucial in international trade. Understanding different methods helps choose the right approach. ## Common Payment Methods ### 1. Telegraphic Transfer (TT) **How it works:** Buyer transfers money directly to seller's bank. **Types:** - **Full payment in advance**: Maximum seller security - **50/50 split**: Half before, half before shipment - **Net 30**: Payment within 30 days of delivery **Pros:** Simple, fast, low cost **Cons:** Risk for buyer if seller doesn't deliver ### 2. Letter of Credit (LC) **How it works:** Bank guarantees payment upon document compliance. **Types:** - **Sight LC**: Payment on presentation - **Usance LC**: Payment at maturity - **Standby LC**: Guarantee only **Pros:** Bank guarantee, security for both **Cons:** Expensive, complex, slower ### 3. Documents Against Payment (DP) **How it works:** Documents only released upon payment. **Pros:** Security for both parties **Cons:** Slower, requires trust ## Risk Considerations ### For Sellers - Prefer advance payment - Accept LC for new buyers - Credit check important ### For Buyers - Avoid 100% advance - Use escrow services - Request references ## Typical Terms | Buyer Relationship | Payment Terms | |-------------------|----------------| | New | 100% advance or LC | | Established | 50% advance, 50% shipment | |Trusted | Net 30-60 | ## Currency Considerations - US Dollar: Most common - Euro: Growing use - Local currency: Some markets ## Conclusion Choose payment terms based on trust level and relationship strength. --- **Keywords**: payment methods, LC TT, international payments