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
Examples are automatically compiled from online sources to show current usage. Read More Opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback.
The letter of credit instrument underpinning a significant portion of international trade still requires stacks of paper documents, multiple manual reviews and a network of correspondent banks, averaging two to three weeks end-to-end. — Meelan Gupta, Forbes.com, 2 Apr. 2026 One is from a commercial landlord who alleges that Given provided them with a forged letter of credit for the school's expansion into the Foodie Market in the South End. — Penny Kmitt, CBS News, 30 Mar. 2026 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 See All Example Sentences for letter of credit

Word History

First Known Use

1616, in the meaning defined at sense 1

Time Traveler
The first known use of letter of credit was in 1616

Rhymes for letter of credit

See All Rhymes for letter of credit

Browse Nearby Words

letter of credence
letter of credit
letter of delegation
See all Nearby Words

Cite this Entry

“Letter of credit.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/letter%20of%20credit. Accessed 7 Jul. 2026.

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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

More from Merriam-Webster on letter of credit

Britannica.com: Encyclopedia article about letter of credit

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