A letter of credit differs from a safe deposit box in several parameters
Posted: Mon Dec 23, 2024 6:51 am
Until recently, escrow was used mainly for shared construction. Only banks from the official list of the Central Bank of the Russian Federation could open it for these purposes. But some credit institutions began to offer the service to businesses, including as a more flexible replacement for a letter of credit. Because the form of the latter is clearly regulated in the Bank of Russia Regulation No. 762-P, and the form of the agreement for an escrow account is free.
Another difference is that some types of letters of credit can be canceled unilaterally, and it is impossible to terminate an escrow account agreement in this way.
It is intended only for non-cash payments, while in a safe luxembourg whatsapp number deposit box, on the contrary, money can only be put in cash. And if an inventory of the contents is not made, then it can be filled with almost anything.
A letter of credit is safer, because any movement of funds is recorded. And what happens to the contents of the box is more difficult to control. You can get cashless money anywhere, but cash - only where it is stored.
Although a bank guarantee is designed to ensure the security of the transaction, like a letter of credit, it works completely differently. It is not a method of payment, but a guarantee for one of the parties that the other will fulfill its part of the agreement on time and in full.
If you still compare a letter of credit with a bank guarantee, then one of the main differences, as in the case of an escrow account, will be the role of the bank. When it acts as a guarantor of the transaction, and not an intermediary, it risks its own funds if something goes wrong.
Pros and cons of a letter of credit
The advantage of letters of credit compared to other types of banking agreements is obvious and undeniable - the security of the transaction for both parties.
Another difference is that some types of letters of credit can be canceled unilaterally, and it is impossible to terminate an escrow account agreement in this way.
It is intended only for non-cash payments, while in a safe luxembourg whatsapp number deposit box, on the contrary, money can only be put in cash. And if an inventory of the contents is not made, then it can be filled with almost anything.
A letter of credit is safer, because any movement of funds is recorded. And what happens to the contents of the box is more difficult to control. You can get cashless money anywhere, but cash - only where it is stored.
Although a bank guarantee is designed to ensure the security of the transaction, like a letter of credit, it works completely differently. It is not a method of payment, but a guarantee for one of the parties that the other will fulfill its part of the agreement on time and in full.
If you still compare a letter of credit with a bank guarantee, then one of the main differences, as in the case of an escrow account, will be the role of the bank. When it acts as a guarantor of the transaction, and not an intermediary, it risks its own funds if something goes wrong.
Pros and cons of a letter of credit
The advantage of letters of credit compared to other types of banking agreements is obvious and undeniable - the security of the transaction for both parties.