What is a T/T (telegraphic transfer)?
A telegraphic transfer is a bank-to-bank wire from your account to the supplier's account. In export practice, "T/T" almost always means a split payment: a deposit up front, then the balance at an agreed trigger. The most common structure is 30% deposit after the sales contract is signed, and 70% balance either before shipment or against a scanned copy of the bill of lading.
The mechanics are simple. Your bank moves the funds using SWIFT, the supplier confirms receipt, and production or shipment proceeds. There is no third-party guarantee. The trust sits between you and the factory, backed only by your contract and your documentation.
Two variants matter for a first order:
- T/T against documents. You pay the balance only after the supplier sends you copies of the bill of lading, packing list, and commercial invoice. This keeps some leverage on your side, because a supplier who has not shipped cannot produce a real bill of lading.
- Full advance T/T. You pay 100% before production. This is the cheapest and fastest for the supplier and the riskiest for you. We tell first-time buyers plainly: never pay 100% up front to an unverified supplier. If a factory demands it on a first deal, treat that as a warning sign, not a discount.
What is an L/C (letter of credit)?
A letter of credit is a payment guarantee issued by your bank to the supplier's bank. Instead of trusting the factory, both sides trust the banking system. Your bank promises to pay the supplier once the supplier presents documents that exactly match the terms written into the credit.
Here is the flow in plain terms. You apply to your bank to open an L/C in the supplier's favor. Your bank sends it to the supplier's bank. The supplier manufactures, ships, and hands a document set to their bank: bill of lading, invoice, packing list, certificate of origin, inspection certificate, and anything else the credit demands. The banks check every document against the credit. If everything matches, the supplier gets paid and you get the documents you need to clear customs. If a single detail is wrong, a misspelled port, a date past the shipment window, the bank can refuse to pay until the problem is fixed.
An "L/C at sight" pays the supplier as soon as compliant documents are presented. A "usance" or deferred L/C pays after a set number of days, which gives you a short credit period. For a first import order, at sight is the norm.
The strength of the L/C is also its weakness. It protects you because the supplier only gets paid on proof of shipment. It protects the supplier because a bank, not a stranger overseas, stands behind the money. But it protects nobody against quality problems that the paperwork does not reveal. Banks check documents, not goods.
T/T vs L/C: side-by-side comparison
The table below is how we explain the trade-offs to buyers who are weighing T/T vs L/C for the first time. Costs are directional, not fixed quotes, because every bank prices differently.
| Factor | T/T (telegraphic transfer) | L/C (letter of credit) |
|---|---|---|
| Bank cost | Low. A wire fee of roughly tens of dollars per transfer | High. Issuance, amendment, and negotiation fees that typically run into the hundreds |
| Speed | Fast. Funds can clear in one to three business days | Slow. Opening and document checking add one to three weeks |
| Buyer protection | Moderate with a deposit split; weak with full advance | Strong. Payment is tied to compliant shipping documents |
| Supplier protection | Weak until deposit lands | Strong. A bank guarantees payment |
| Paperwork | Light. Contract, invoice, wire details | Heavy. Every document must match the credit exactly |
| Cash flow | Deposit ties up funds early | Funds or credit line are committed when the L/C opens |
| Best for | Vetted suppliers, repeat orders, smaller values | Large first orders, unknown suppliers, high-value contracts |
| Main risk | Losing a deposit to a bad actor | A document discrepancy that stalls the goods |
The pattern is clear once you lay it out. T/T trades protection for speed and low cost. L/C trades cost and speed for a document-backed guarantee.
Which costs more, and who pays?
Cost is where many first-time importers underestimate the L/C. A telegraphic transfer is one of the cheapest ways to move money across borders. You pay a wire fee, sometimes an intermediary bank charge, and that is roughly the whole bill.
A letter of credit is a banking product with several fee layers: an opening fee charged as a percentage of the value, amendment fees every time a term changes, and negotiation or handling fees on the supplier's side. Amendments add up quickly. In our experience, the first draft of an L/C almost always needs at least one amendment, because a shipment date, a partial-shipment clause, or a document requirement gets written too tightly. Each change costs money and time.
Who pays which fee is negotiable and should be written into the contract. Standard practice is that each party covers the charges raised by its own bank. Settle this before the L/C opens, not after, so a surprise fee does not sour the relationship on your first deal.
Which is safer for a first order?
For a genuine first order with a supplier you have not worked with, an L/C at sight is the safer instrument on paper, and that safety is exactly why it exists. The bank will not release your money until the supplier proves the goods were shipped in line with the agreed terms. A supplier who never ships never gets paid.
That said, safety on a first order is not only about the payment term. We have seen buyers open a clean L/C and still receive the wrong specification, because the credit called for documents, not for the right product. This is why the real protection stack is layered:
- A written contract with exact specifications, tolerances, and quantities.
- A supplier you have actually verified: business license, export history, and ideally a video call or a visit.
- A pre-shipment inspection, either your own agent or a third-party firm, made a condition of payment.
- The payment term itself, chosen to match how much you trust the counterparty.
Get the first three right and a well-structured T/T with a deposit and balance against documents can be perfectly safe. Skip them and even an L/C only guarantees that you paid for something that shipped, not that it was the right something.
Which should you actually use, and when?
Match the term to the size of the order and the depth of the relationship. There is no single correct answer, and picking the "safest looking" instrument for every deal wastes money on small, low-risk orders.
Use T/T with a deposit split when:
- You have verified the supplier and the order value is modest.
- The relationship is new but the risk is contained by a reasonable deposit and balance against shipping documents.
- Speed matters and both sides want to avoid banking friction.
Use an L/C at sight when:
- The order is large enough that losing a deposit would hurt.
- The supplier is unknown and you cannot yet visit or fully verify them.
- Your own buyer or lender requires document-controlled payment.
Move to cleaner T/T terms once you have a track record. By the second or third clean shipment, most buyers we work with drop the L/C and settle on T/T, because the trust that the bank used to provide now sits between the two companies directly. That shift saves everyone time and fees.
Whatever term you pick, write it into the contract in full: percentages, triggers, document lists, and inspection conditions. If you want a specific structure quoted for a real order, request a quote and we can lay out the terms alongside the product pricing so there are no surprises at the bank.
Frequently asked questions
Is T/T safe for a first order?
A split T/T can be safe on a first order when the supplier is verified and the balance is paid against shipping documents rather than in advance. The danger is a full 100% advance to a factory you have not checked. Pair a deposit with a pre-shipment inspection and a firm contract, and the risk stays contained.
Why do some suppliers prefer T/T over L/C?
T/T is faster and far cheaper for the supplier, with no bank scrutinizing every document and no risk of a payment held up over a small discrepancy. Factories with strong cash discipline often quote a slightly better price on T/T because it lowers their financing cost and paperwork burden compared with a letter of credit.
What is an L/C discrepancy and why does it matter?
A discrepancy is any mismatch between the shipping documents and the exact terms written in the letter of credit, such as a wrong date, a misspelled name, or a missing certificate. Discrepancies let the bank refuse payment until they are fixed. They are common, they cause delays, and each fix can carry a fee.
How much deposit is normal on a T/T?
A 30% deposit with a 70% balance is the most common split in construction hardware exports, though it ranges roughly from 20% to 50% depending on order size and materials. A supplier who demands 100% up front on a first order should be questioned, because that structure removes all of your leverage.
Can I switch from L/C to T/T later?
Yes, and most buyers do. After two or three clean shipments, the trust that the bank provided has effectively transferred to the direct relationship, so many buyers move to a simpler T/T split to save on fees and time. Keep documenting each order so the track record is clear if terms are ever questioned.
Choosing between T/T vs L/C comes down to how well you know the supplier and how much is on the line. Start conservative on a first order, verify everything, and simplify as trust builds. If you are sourcing construction hardware and want payment terms structured around a real order, contact our team and we will walk you through the options.
