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: 2/14/2019

Choosing the right method of trade finance is important to ensuring timely and reliable payment while also remaining competitive in the export market. The most common methods of payment, according to Export.gov, are:

Cash in Advance

With cash-in-advance payment terms, an exporter can avoid credit risk because payment is received before the ownership of the goods is transferred. For international sales, wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters. Escrow services are becoming another cash-in-advance option for small export transactions. However, requiring payment in advance is the least attractive option for the buyer, because it creates unfavorable cash flow. Foreign buyers are also concerned that the goods may not be sent if payment is made in advance. Thus, exporters who insist on this payment method as their sole manner of doing business may lose to competitors who offer more attractive payment terms.

Open Account

An open account transaction is a sale where the goods are shipped and delivered before payment is due, which in international sales is typically in 30, 60 or 90 days. This is one of the most advantageous options to the importer in terms of cash flow and cost, but it is consequently one of the highest risk options for an exporter. Due to intense competition in export markets, foreign buyers often press exporters for open account terms since the extension of credit by the seller to the buyer is more common abroad. Therefore, exporters who are reluctant to extend credit may lose a sale to their competitors. When offering open account terms, the exporter can seek extra protection using export credit insurance.

Letter of Credit

Letters of credit (LCs) are one of the most secure instruments available to international traders. An LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all required documents. The buyer establishes credit and pays his or her bank to render this service. An LC is useful when reliable credit information about a foreign buyer is difficult to obtain, but the exporter is satisfied with the creditworthiness of the buyer’s foreign bank. An LC also protects the buyer since no payment obligation arises until the goods have been shipped as promised.

Documentary Collections

A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of the payment for a sale to its bank (remitting bank), which sends the documents that its buyer needs to the importer’s bank (collecting bank), with instructions to release the documents to the buyer for payment. Funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for those documents. D/Cs involve using a draft that requires the importer to pay the face amount either at sight (document against payment) or on a specified date (document against acceptance). The collection letter gives instructions that specify the documents required for the transfer of title to the goods. Although banks act as facilitators for their clients, D/Cs offer no verification process and limited recourse in the event of non-payment. D/Cs are generally less expensive than LCs.


Consignment in international trade is a variation of open account in which payment is sent to the exporter only after the goods have been sold by the foreign distributor to the end customer. An international consignment transaction is based on a contractual arrangement in which the foreign distributor receives, manages, and sells the goods for the exporter who retains title to the goods until they are sold. Consignment helps exporters become more competitive on the basis of better availability and faster delivery of goods. Selling on consignment can also help exporters reduce the direct costs of storing and managing inventory. The key to success in exporting on consignment is to partner with a reputable and trustworthy foreign distributor or a third-party logistics provider. Appropriate insurance should be in place to cover consigned goods in transit or in possession of a foreign distributor as well as to mitigate the risk of non-payment.

For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide available at www.Export.gov/TradeFinanceGuide.
When conducting business with a Swiss bank, the most common trade finance instruments offered will be letters of credit (sometimes referred to as documentary credit), documentary collections, and bank guarantees. With a bank guarantee, the bank promises to pay a beneficiary in the event that the other party in a transaction fails to meet their contractual obligations. It is therefore similar to a letter of credit, but distinct in that the payment of the security in a bank guarantee occurs if the party in question does not meet its obligations.

The following credit-rating agencies have been recognized by the Swiss Financial Market Supervisory Authority (FINMA): DBRS, fedafin AG, Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s Ratings Services. Swiss companies behave reliably when it comes to payment and usually pay in advance or within 30 days. Should an entity fail to pay its debts, however, debt collection agencies can help with contacting a debtor and providing advice throughout the collection process. Domestic agencies or international agencies that regularly operate in Switzerland possess thorough knowledge of customary practice and applicable laws, and remain unaffected by language barriers. If debt collection cannot be settled amicably, the matter may be brought before the Debt Collection Office (Betreibungsamt) of the appropriate canton, which will initiate legal action.
For information on routine monetary transactions and accepted credit cards, please refer to the “currency” section of the Business Travel chapter.

Prepared by the International Trade Administration. With its network of more than 100 offices across the United States and in more than 75 markets, the International Trade Administration of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.