Vocabulary【Major Types of Payments】
letter of credit
A letter of credit is a letter from a bank that guarantees that a buyer will pay a sum of money on time.
If the buyer is unable to pay, the bank must pay the remaining amount.
This payment method is appropriate when the buyer and the seller do not know each other very well.
documentary collection
In a documentary collection, a bank collects payment of goods for an exporter.
In order to collect the payment, the exporter needs to send the proper documents to the importer's bank along with payment instructions.
Documentary collection is risky for exporters, since reimbursement is limited if the importer doesn't pay.
Therefore, this method is recommended only for traders who have a long-term relationship.
exporter: 出口商
importer: 進口商
open account
In an open account transaction, goods are delivered to the buyer before payment is due.
This makes it a high-risk payment option for the exporter, since there is no guarantee of payment.
To combat this risk, exporters often purchase credit insurance, which reimburses the seller in case of a loss.
This has become a popular form of payment, since there is fierce competition in export markets.
combat: 戰(zhàn)斗
remittance
A remittance is the exchange of funds from an importer to an exporter via bank transfer.
After transferring the funds to the exporter, the bank will charge the importer a commission fee.
Today, many banks offer the electronic mode of transfer, which is much faster than traditional methods.
remittance: 匯款
mode: 風格
commission: 手續(xù)費
cash-in-advance
With cash-in-advance payment terms, an exporter receives payment before they transfer their goods.
This commonly comes in the form of wire transfers or credit card payments.
It helps avoid credit risks for the exporter, since they receive payment before shipping.
However, the buyer may be concerned that they will not receive the goods if they pay in advance.
Question
- As a buyer, I prefer cooperating with SmartTech since they can offer open account, which can ease our financial pressure.
- Since the charge for remittances is normally shared by both the seller and buyer, it's not rational to ask one party to be responsible for it.
- Cash-in-advance commonly comes in the form of wire transfers or credit card payments.
- A common form of cash-in-advance payment is wire transfer.
- Cash-in-advance is not an attractive option for the buyer because it creates unfavorable cash flow.
ease: 減輕
rational: 理性的
