The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-11-30
LETTERS OF CREDIT.
Reasons why They Are Better Than
Cash or Bills of Exchange.

Boston Herald.
One of the most interesting features OF
the business substitute for actual money,
and a substitute that is used by nearly
every transatlantic traveller, is the letter
of credit.
To illustrate a typical case, let us intro
duce Mr.. Jones. He decides that he would
like to spend a year in travel, and, after
mapping out an itinerary, he makes an es-
innate of the amount of money it will be
necessary for him to spend. He fixes the
amount, say, at SIC ,0O0.
The average traveller does not care to
load himself down with any such sum, be-
cause, in addition to the inconvenience of
handling it, he makes himself a possible
target for thieves, in case they learn of his
possessions. He can, of course, divide this
sum into smaller amounts by drawing bills
of exchange, payable on certain banks in
certain cities throughout the world, but the
letter of credit affords a much more simple
and satisfactory method of keeping himself
supplied with funds.
After arranging his itinerary and satisfy
ing himself that he can afford to expend
the amount he has estimated the trip will
cost him Mr.. Jones betakes himself to a
banking house in this city which issues
letters of credit and obtains such a docu-
ment.
1t is usually a large folder. Or the first
page is an engraved letter Of introduction.
The banker, addressing his correspondents
in whatever part of the world they may be,
begins by formally taking the liberty"
etc, of introducing Mr.. Jones, and certi-
flying that his credit is equal to the sum
of $4,000. At the foot Of the page Mr..
IOn9G RnG his name
Another page of the document is ruled
of into spaces in which are to be filed the
various amounts drawn. Still another page
is devoted to a list of banks in different
cities and towns in the world at which such
a letter will be honored.
This letter is not merely an assurance
that Mr.. Jones Is good" for the amount
named. but that he is a proper person. from
a social point of view, to receive such a
letter. This is one of the old@fashioned
features of banking which is not based en-
tirely on a dollar-and-cents basis.
Mr.. Jones must furnish assurances to the
banking house, In case he is personally un-
Quoting ii, that he Is not only financially
sound, but socially so; otherwise the letter
is refused him. He can buy a bill Of ex-
6h4n 5% on the basis oa ase6 9t dollars and cents
With this letter Of credit Mr.. Jones may
travel TO any part OF the civilized world
without taking with him a cent of money
wants, within the limits Of the sum named
therein, will be supplied. Before leaving
he must place under the control of the
banking house the amount named In the
letter, either in cash or Its financial equiv
alent.
After paying for his steamer passage he
carries with him from this country only
sufficient money to cover incidental ex-
penses. When he reaches London he calls
upon the correspondents Of the banking
house, presents his letter and draws as
much as he may wish for current expenses.
He is required 20 furnish no further iden-
tification than &. signature which shall be
similar 10 the one affixed by him at the bot
tom of the letter OF credit. The sum he
has drawn is deb:ted on a blank page of
his letter, so that he knows just what his
balance IS at any time.
When he reaches Paris he produces the
same letter and repeats the operation. The
second amount is also debited. At Berlin
he does likewise. and so it goes, whether
the place be Rome, Algiers, Yokohama, Cal
cutta, Melbourne, Durham or any one of 500
places that might be named. If there is no
stated correspondent in a place. the place
is not too small for the presentation OF his
letter of credit. provided il is in the civil
lied world and there is a bank there.
Nor is this all. The banking house,
through its various agencies. becomes a
sort of sponsor and personal guardian. The
letter of credit becomes in reality a letter
Of introduction and opens up to him many
courtesies. If his friends in this country
wish TO write 10 him they address the let
tiers in care Of the London banking house
whose letter of credit he carries. and that
house, through It's mail forwarding depart
ment, sees TO il that all communications
intended for him are sent TO whatever
point of his Itinerary may be his abiding
place for the time being
More thar that. should he become I'll
while on his travels, his letter is a guaran-
tee that some one representing the local
correspondent will take an interest in HIS
case. and should ne die. his financial spon-
sors will engage that his remains are de-
Gently cared for and his personal effects
guarded.
calls on his bankers and surrenders his let
ter OF credit. The various amounts he has