Payment Terms Guide

Comprehensive guide to international payment terms in export trade. Learn about Telegraphic Transfer (T/T), Letter of Credit (L/C), Documents Against Payment (D/P), Documents Against Acceptance (D/A), Cash Against Documents (CAD), and Open Account. Understand risks, costs, speed, and best practices for each payment method.

Payment Terms Guide

Payment terms define when and how payment will be made in international trade. Choosing the right payment method balances risk, cost, speed, and relationship factors. Understanding each option helps protect your business while remaining competitive.

Key Factors to Consider:

Risk Level: Seller vs buyer risk exposure
Cost: Bank fees, confirmation charges
Speed: How quickly payment is received
Relationship: Trust level with buyer

Select a Payment Term

Telegraphic Transfer (Wire Transfer)

Risk: Low risk for seller if payment received before shipmentSpeed: 1-3 business daysCost: Moderate (bank fees apply)

Direct bank-to-bank transfer of funds. Fast and secure method where buyer transfers payment directly to seller's bank account.

When to Use

Established relationships, repeat customers, smaller transactions

Advantages

✓ Fast payment processing
✓ Direct transfer - no intermediaries
✓ Lower fees than L/C
✓ Simple process
✓ Good for trusted relationships

Disadvantages

⚠️ Seller risk if payment not received
⚠️ No payment guarantee
⚠️ Buyer bears all risk
⚠️ Requires trust between parties

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Payment Terms Guide