Usance letter of credit

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

A usance letter of credit pays the exporter at a set time after presentation or shipment — often 60, 90 or 180 days — instead of on presentation, as a sight credit does. Once compliant documents are presented and accepted, the issuing bank's obligation to pay at maturity is fixed: the exporter can wait for the due date, or have the accepted payment discounted to receive cash now, at a cost set by the days remaining and the bank risk. For the importer, usance is credit from the supplier with a bank's promise behind it.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.