Methods of Payment

Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country.

Last published date: 2019-10-13

There are various alternatives involving credit, insurance, and trade finance tools to help U.S. companies against non-payment risks when trying to expand their export sales. Factors to consider for the analysis of payment should include the type of business, nature of the relationship with the buyer, economic, and political conditions of the country of export. Among the payment methods commonly used for international trade transactions are open accounts, commercial letters of credit, cash against documents, factoring, documentary collections and cash in advance. Factoring, cash in advance and irrevocable payment undertakings, such as letters of credit confirmed by U.S. banks, are the most frequently used methods of payment for U.S. exporters selling to Honduran firms (particularly in transactions of significant value). Open Accounts are often used with recurring sales to established buyers with good track records of timely payments. When appropriate, a third party, such as the Export-Import Bank of the United States, should insure open account transactions. It is highly discouraged to send shipments without agreeing to payment terms in advance and receiving proper bank documents.