When engaging in global commerce, understanding foreign trade payment methods is crucial for smooth transactions. Different payment terms affect cash flow, risk allocation, and trust between buyers and sellers. This article explores seven widely used international payment methods along with their standard English expressions to help businesses communicate effectively in cross-border deals.

1. Letter of Credit (L/C)

A Letter of Credit is one of the most secure payment methods in international trade. It involves a bank guaranteeing the buyer’s payment to the seller upon meeting specified conditions.

Key English Phrases:

  • “We prefer payment by irrevocable L/C.”
  • “The L/C must be confirmed by a prime bank.”

Common types include:

  • Sight L/C (payment upon document presentation)
  • Usance L/C (deferred payment)

2. Telegraphic Transfer (T/T)

Telegraphic Transfer, or wire transfer, is a direct bank-to-bank transaction. It’s fast but requires trust since payment is made before shipment unless staged.

Key English Phrases:

  • “30% deposit by T/T in advance, balance before shipment.”
  • “T/T payment within 7 days after B/L date.”

3. Documentary Collection (D/P or D/A)

Under Documentary Collection, banks handle documents against payment (D/P) or acceptance (D/A). It’s less secure than L/C but cheaper.

Key English Phrases:

  • “Payment by D/P at sight.”
  • “D/A 60 days after shipment.”

4. Open Account (O/A)

An Open Account allows buyers to pay after receiving goods, common in long-term partnerships. High risk for sellers.

Key English Phrases:

  • “O/A 90 days from invoice date.”
  • “Net 60 terms under O/A agreement.”

5. Cash in Advance (CIA)

Cash in Advance requires full payment before production or shipment. Low risk for sellers but may deter buyers.

Key English Phrases:

  • “100% CIA for first-time orders.”
  • “Payment via CIA before production starts.”

6. Standby Letter of Credit (SBLC)

A Standby L/C acts as a safety net, where the bank pays if the buyer defaults. Often used in high-value deals.

Key English Phrases:

  • “SBLC required for contract performance.”
  • “Payment backed by a standby L/C.”

7. Escrow Services

Escrow holds funds until both parties fulfill obligations. Popular in B2B e-commerce.

Key English Phrases:

  • “Transaction secured through escrow.”
  • “Funds released after inspection.”

Choosing the Right Payment Method

Factors to consider:

  • Buyer/seller trust level
  • Country risk
  • Transaction size

For example, L/Cs suit high-risk markets, while O/A works for trusted partners.

Final Tips for Clear Communication

  • Use precise terms like “D/P at sight” instead of vague phrases.
  • Clarify deadlines (e.g., “T/T within 5 working days”).

By mastering these payment terms in English, businesses can negotiate confidently and minimize misunderstandings in global trade.