Compare · Fast reference
LC vs Documentary Collection vs Open Account
See the structural difference first, then open the full lessons for exceptions and detailed procedure.
| Question | LC | Documentary Collection | Open Account |
|---|---|---|---|
| Bank payment undertaking | Yes, under LC terms | No LC-style bank undertaking merely because banks collect documents | Usually no bank undertaking |
| Documents controlled by banks | Yes, for presentation/examination | Banks handle collection documents under instructions | Often documents move directly/commercially |
| Seller payment risk | Shifted toward issuing/confirming bank when terms met | Buyer risk remains materially important | Buyer risk is usually central |
| Cost/complexity | Higher | Middle | Lower operational banking complexity |
Remember thisA comparison simplifies the big picture. The actual undertaking, rules, wording, law and bank policy still control the real transaction.
How to use this comparison
The labels are a starting point, not a substitute for the actual wording. Before choosing a structure, ask what creates the payment obligation, who carries the credit risk, what rules apply, what event triggers payment and whether the receiving bank or financier accepts the structure.
1. Obligation
Who actually promises or is ordered to pay?
Who actually promises or is ordered to pay?
2. Trigger
What must happen before payment is due?
What must happen before payment is due?
3. Rules & documents
What wording or documentary conditions control the result?
What wording or documentary conditions control the result?
4. Bank acceptance
Will the relevant bank accept, advise, confirm, finance or process it?
Will the relevant bank accept, advise, confirm, finance or process it?