Acceptance Letter of Credit - Explained
What is an Acceptance Letter of Credit?
Written by J. Mance Gordon
Updated at April 19th, 2024
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What is an Acceptance Letter of Credit?
A letter of credit is issued by a bank as a promise to pay a specific amount when the terms of the letter or met.
- Read more about how a Letter of Credit works.
An Acceptance Letter of Credit, also known as Documents Against Acceptance, stipulates a specific time for payment, as well as the terms that must be complied with before payment is authorized.
There are two types of acceptance credit, the confirmed acceptance credit and the unconfirmed one.
When a letter of credit is confirmed, it guarantees a bank payment (regardless of whether the Applicant or Buyer has the money in its account) and serves as a proof that all the terms for payment of the letter have been met.
Unconfirmed acceptance letter on the other hand means that the bank is not guaranteeing payment. Payment will only be rendered if assets are available in the payor's account.