letter of credit

noun phrase

1

: a letter addressed by a banker to a correspondent certifying that a person named therein is entitled to draw on the writer's credit up to a certain sum

2

: a letter addressed by a banker to a person to whom credit is given authorizing drafts on the issuing bank or on a bank in the person's country up to a certain sum and guaranteeing to accept the drafts if duly made

Examples of letter of credit in a Sentence

Recent Examples on the Web

The Federal Student Aid office will also require an irrevocable letter of credit for $36 million due to the financial risk the government is taking on as the institution is under numerous investigations from the Trump administration, according to the department. —Lexi Lonas Cochran, The Hill, 19 Sep. 2025

Illinois law requires that life care facilities keep an escrow or letter of credit equal to six months’ worth of mortgage or bond payments, but the facilities aren’t required to save enough to repay residents’ entrance fees. —Robert McCoppin, Chicago Tribune, 15 Apr. 2025

The joint venture agreement includes a $625 million commitment from GM to fund the project, including a $195 million letter of credit facility. —Quartz Intelligence Newsroom, Quartz, 28 Mar. 2025

The administration turned to the high court after U.S. District Court Judge Amir Ali ordered the administration to pay invoices and letter of credit drawdown requests to USAID and State Department contractors for work completed before Feb. 13. —Avery Lotz, Axios, 5 Mar. 2025

The bid required the city to put forward an irrevocable letter of credit of $30 million, in case the host committee fell short of its nearly $85 million obligation – a record-breaking sum – and convince party officials to recommend Chicago over Atlanta, Houston and New York. —Francesca Chambers, USA TODAY, 17 Aug. 2024

The specific details of WBD’s match offer were not immediately available, but a source said that the company had secured a letter of credit that would cover what is believed to be a $5.4 billion upfront payment that Amazon agreed to in its deal. —Alex Weprin, The Hollywood Reporter, 24 July 2024

According to Sports Business Journal, WBD secured a letter of credit from multiple banks to match the offer, which included an up-front payment from Amazon covering the first three years of the 11-year contract. —Barry Jackson, Miami Herald, 23 July 2024

Arab merchants from Baghdad could travel to Cordoba, Spain, taking with them a letter of credit—a suftaja—to be cashed on arrival by an agent, part of a network of money transfer that came to be known as hawala. —Harris Irfan, Foreign Affairs, 15 May 2015

Word History

First Known Use

1616, in the meaning defined at sense 1

Rhymes for letter of credit

• accredit
• discredit
• noncredit
• dedit
• edit
• microcredit

Legal Definition

letter of credit

: a document issued to a beneficiary at the request of the issuer's customer in which the issuer (as a bank) promises to honor a demand for payment by the beneficiary in order to satisfy or secure the customer's debt compare guaranty

Note: A letter of credit is usually requested by a buyer of merchandise (the issuer's customer) to be issued to the seller (the beneficiary) in order to secure the payment for the merchandise.

— commercial letter of credit

: a letter of credit which is used to satisfy payment for merchandise and which usually requires the beneficiary to present a draft and some documentary proof (as of shipment or receipt of the merchandise) when making a demand for payment

— irrevocable letter of credit

: a letter of credit which the issuer cannot revoke or modify without the consent of the issuer's customer or the beneficiary

— standby letter of credit

: a letter of credit which is used to secure payment in case of default by the issuer's customer and which requires the beneficiary to present some documentary proof of such default when making a demand for payment