Letter of credit plays a vital role in the working capital, mainly when you’re dealing with international business. Below are a few of the important features of LC: 1. LC is issued against the collateral or FD. This is because, if by means the buyer defaults to make the payment the issuing bank has to make the payment to the advising bank. The issuing bank wants to safeguard its risk of issuing a letter of credit. 2. There are certain charges charged by the opening bank for issuing a letter of credit. The charges depend on the type of LC, bank and the amount, etc. 3. Time to time there are many guidelines issued by the International Chamber of Commerce, which intend to smoother international trade. 4. The payment of the LC is more dependent on the correctness of the documents and not on the quality of the goods and services.