ADVICE OF CREDIT Meaning and
Definition
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Advice of credit is a term used in banking and finance to refer to a document or message sent by a bank or financial institution to the recipient, typically another bank or a customer, to provide information and confirmation about the establishment of a credit. Essentially, it is a formal notification that outlines the details of a credit transaction and informs the recipient about the availability and terms of the credit.
The advice of credit typically includes essential information regarding the credit, such as the opening and expiration date, maximum limit of credit, interest rates, fees, and any special conditions or requirements. It serves as an important communication tool between banks and customers, ensuring transparency and facilitating efficient financial transactions.
This document is commonly used in international trade and commerce to facilitate the process of buying and selling goods across national borders. It allows the buyer to demonstrate to the seller that a credit line has been established in their favor for the specific transaction. This credit can be drawn against by the seller, providing reassurance of payment and reducing the risk of non-payment.
Overall, advice of credit plays a pivotal role in facilitating financial transactions and serves as a crucial communication tool in the banking and finance industry, ensuring transparency and fostering trust between parties involved in credit transactions.
