A still further extension of the check system is accomplished by the so-called Letter of Credit. As previously stated, it is intended for the use of travellers, especially in foreign countries. This document is in the form of a letter addressed by the issuing bank to a long list of similar institutions conveniently situated in the various foreign countries which are visited by travellers, and asking them to furnish the person or persons named therein money in sums as desired up to a certain amount, accepting as reimbursement therefor his or their check upon some specified correspondent of the issuing bank. Like checks and drafts, they are numbered and dated, and usually a date is specified after which the letter is not to be honoured. As a means of identification of the person or persons in whose favour it is issued and as a means of procuring a duplicate in case of loss, the letter of credit is often accompanied by a Letter of Indication, which is also dated and numbered, and contains the name of the payee and his signature, the number of the letter of credit, and the names and addresses of the banks which are asked to honour it. The following illustrates the usual form of such letters: -

The Exchange Bank Of Philadelphia. No. 11333. Philadelphia, January 31, 1902

Gentlemen:

This letter will be presented to you by Mr. John Doe, in whose favour we beg to open a credit with you collectively for the sum of One Hundred Pounds Sterling, to which extent be pleased to furnish payments in sums as required, inscribing the amounts so paid on the back of this letter. In reimbursement you will take his draft on the London City and Midland Bank, Limited, London, inserting therein the date and number of this credit, which we engage shall meet with due honour.

Your charges are to be paid by the bearer hereof.

Requesting for Mr. Doe your best attention, we have the honour to be, Gentlemen,

Your obedient servants, £100. Richard Roe.

This credit is in force until December 31, 1902.

To Messieurs the Bankers named in our Letter of Indication No. A 3520.

Letter of Indication.

The Exchange Bank Of Philadelphia

No. A 3520. Philadelphia, January 31, 1902.

To Messieurs the Bankers named in this Letter: Gentlemen:

This letter will be handed to you by Mr. John Doe, who is furnished with a Circular Letter of Credit, No. 11333, issued by this bank.

Recommending Mr. Doe to your kind attention, and referring you to his signature below, I have the honour to be, Gentlemen,

Respectfully yours,

Richard Roe. Signature of

John Doe.

On the inside of this letter are printed the names and addresses of the various banks, usually classified under the heads of countries and cities.

The entry of the sums paid on the back of the letter of credit enables each bank to whom it is presented to determine the amount still due, and thus prevents overdrawing, and the drafts, drawn by the payee and sent to the correspondent named in the letter and by him to the bank of issue, serve as a means of properly adjusting the accounts between the various banks concerned.

In their origin and relations to the banking business letters of credit present no peculiarities not already observed in the case of checks and drafts. They are a very convenient and economical invention which still further extends the use of deposits as money, and thus increases the opportunities for the investment of bank credit. In the three forms of checks, drafts, and letters of credit, deposits perform a very large proportion of the world's exchanges, and constitute at the present time the most elastic portion of the world's currency. Since the form of these documents may be easily modified and new ones invented as convenience and the changing needs of commerce demand, the persistence of this form of currency is assured, and a still further extension of its use may be expected.