Business and Personal Finance Dictionary

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• COMMERCIAL LETTER OF CREDIT
  
  An obligation issued by a bank on behalf of a bank customer to a third party. A commercial or trade letter of credit is a bank promise to pay the third party for the purchase of goods by the bank’s customer. If the bank’s obligation to pay is not immediate, the transaction can later give rise to a banker’s acceptance. Also called trade letter of credit. See banker’s acceptance and letter of credit.
  
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