letter of credit

American  

noun

1. an order issued by a banker allowing a person named to draw money to a specified amount from correspondents of the issuer.

2. an instrument issued by a banker authorizing a person named to make drafts upon the issuer up to an amount specified.

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letter of credit British  

noun

1. a letter issued by a bank entitling the bearer to draw funds up to a specified maximum from that bank or its agencies

2. a letter addressed by a bank instructing the addressee to allow the person named to draw a specified sum on the credit of the addressor bank

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Etymology

Origin of letter of credit

First recorded in 1635–45

Example Sentences

That includes reciprocal deposit networks, Federal Home Loan Bank letters of credit, and collateralized deposits, all of which allow financially sound banks to provide millions of dollars in insured coverage.

From Barron's

The lending to the units is backed by a letter of credit from another bank, according to filings in bankruptcy court in Houston.

From The Wall Street Journal

The French bank, which did business in Sudan from the late 1990s until 2009, provided letters of credit that allowed Sudan to honor import and export commitments.

From Barron's

The bill would also limit the value of security deposits and letters of credit required for commercial leases.

From Seattle Times

While customers usually pay up front and in dollars, "we had to resort to letters of credit with those buyers from Pakistan", said Muthaura.

From Reuters