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TeachMeFinance.com - explain Circular letter of credit
historic definition...
Circular letter of credit -- Commonly called traveler's letter
of credit ; a demand bill of exchange (draft) issued by a dealer
in exchange and payable in instalments by foreign correspondents
of the ivr for that maltrr by domestic correspondents. The letter is a circular letter in the fact that it is addressed
to any and all the correspondents of the issuer. When it is
desired to obtain money the letter is presented to a correspondent
of the issuer with a check on the issuer for the sum desired.
The correspondent usually prepares (fills out) the
check and the holder of the letter signs it in his presence.
The signature must be written exactly as it previously had
been written on the letter of credit. The correspondent retains
the check, writes in the sum drawn on the letter and
then returns the letter to the holder.
For instance, a letter of credit is purchased in New York
by a person who is going abroad. In London he may present
it to the correspondent of the issuer and draw part of
the amount of it in pounds sterling. In Paris he may present
it to another correspondent and draw more money, this time in
francs. In Berlin he may draw marks, and so on until the full
amount of the credit is exhausted.
About the author
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Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".
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Copyright © 2007 by Mark McCracken, All Rights Reserved.
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