Definition. - A letter of credit is an instrument issued by a banker, and addressed to his correspondents in specified places, by which a named person may draw funds in amounts to suit his convenience, upon his complying with certain requirements, such as identifying himself, etc., the total amount drawn not to exceed the amount limited by the letter of credit.

To whom issued. - Letters of credit are usually issued for the use of travelers in foreign countries, to save the transmission of money from one part of the world to another, thus avoiding the risk necessarily incident to carrying real money about.

How Funds are obtained. - When a letter of credit is issued to a traveler he is required to subscribe his name on the document in the banker's presence, as a means of identification later on. Other copies of the signature are sometimes left and forwarded to the leading foreign bankers drawn upon. When the traveler desires funds he will present his letter to the proper banker at the place where he may be staying. The letter itself always specifies the banks that will honor the draft. When the letter is presented to a foreign banker for payment, he draws a sight draft on the London banker specified, which draft the traveler is required to sign. If the signatures on the letter and the draft are identical, the amount desired is promptly paid and indorsed on the back of the letter. Payment is usually made upon the simple identification of comparison of signatures. The indorsements on the back of the letter show at all times the balance available for the traveler. The bank making the last payment retains the letter to send to the drawees in London.

1 Thirty minutes is allowed for the morning settlement, and for each additional fifteen minutes' detention $2 is added to this sum.

Brown Brothers & Co.'s Circular Letter of Credit

This letter to be surrendered with the last draft hereunder.

No. 7215 Boston, Mass., March 6, 1906

Gentlemen:

We beg to introduce to you Mr. Jhon, O. Nouis, to whom you will please furnish such funds as he may require up to the aggregate amount of Five Hundred pounds sterling against demand drafts on Messrs. Brown, Shipley & Co., London, each draft to b plainly marked as drawn under Brown Brothers & Co.'s Letter of Credit No. 7215.

We engage that such drafts shall meet with due honor in London, if negotiated before the 6th, of March, 1907, and request you to buy them at the rate at which you purchase demand drafts on London.

The amount of each draft must be inscribed on the back of this letter, and to this we wish to call your special attention. This letter itself should be canceled and attached to the final draft drawn.

Please see to it that the drafts be signed in your presence and carefully compare the signature with the one below.

We are, Gentlemen

Your obedient servants £500. Brown Brothers & Co.

To Messieurs The signature of the bankers mentioned John O Morris.

on the third page of this letter of credit.