Letters of credit normally cost 1% of the amount covered in the contract. For example, if a buyer needs a $100,000 letter of credit and the letter of credit will cover 10% of the contract ($10,000) then the buyer will pay $100 for the letter of credit.Apr 12, 2017
Who pays the cost of LC?
Pricing. Issuance charges, covering negotiation, reimbursements and other charges are paid by the applicant or as per the terms and conditions of the LC. If the LC does not specify charges, they are paid by the Applicant. Charge-related terms are indicated in field 71B.
How are letter of credit fees calculated?
Upon issuance of a Standby Letter of Credit (SLOC), the Bank charges a non-refundable fee which is calculated using the following formula: {Face Amount * FEE * (Term in Days/360)}. The FEE used in the above formula is based upon the Face Amount of the SLOC and is currently 11.5 bps per annum.
Do you have to pay for a letter of credit?
There isn't a set fee for letters of credit. The bank you use will decide on costs. You can expect to be charged some percentage of the amount covered by the letter of credit.
Who pays the fees associated with a letter of credit?
Pricing. Issuance charges, covering negotiation, reimbursements and other charges are paid by the applicant or as per the terms and conditions of the LC. If the LC does not specify charges, they are paid by the Applicant. Charge-related terms are indicated in field 71B.