3 Letter of Credit: A letter of credit is an assurance from the writer of the letter (a commercial bank) to the creditor on behalf

of the debtor that the former will receive payment. In the international transaction, for example, an importer may arrange a letter of credit from his commercial bank according to which the exporter may draw bill on the bank rather than on the importer. The letter of credit provides an assurance to the exporter that the bill will be paid by the bank. Thus, the issuance of letter of credit gives double assurance of payment because the exporter can now rely on the standing and integrity of the bank rather than on the standing and integrity of the importer alone.
4. Cable Transfers: A cable transfer is a telegraphic order sent by a bank to its correspondent bank abroad to pay the specified amount to certain person from its deposit account. For example, an American importer who wants to make payment abroad can arrange for a cable transfer from his American bank. The American bank will direct its correspondent bank abroad to transfer the specified sum from its account of the exporter. 5. Other Instruments: Other means of foreign payments are: traveler's cheques, personal cheques, international money orders, home currency, gold, etc.

METHODS OF FOREIGN PAYMENT