Cyclopædia of Political Science, Political Economy, and the Political History of the United States
CREDIT, Letter of, is an order given by bankers or others at one place, to enable a person to receive money from their agents at another place. The person who obtains a letter of credit may proceed to a particular place, and need only to carry with him a sum sufficient to defray his expenses; and it gives him some of the advantages of a banking account when he reaches his destination, as he may avail himself of it only for part of the sum named in it. If it were not for the convenience which a letter of credit affords, a person who was intending to make a tour on the continent, for example, would be under the necessity either of taking with him the whole of the sum which he would require during his absence, or of receiving remittances from home, addressed to him at particular places.
—A letter of credit is not transferable. By a strict interpretation of a clause in the stamp act (55 Geo. III., c. 184), an instrument of this nature would seem to be liable to the same duty as on a bill of exchange payable to bearer or order; but in practice the duty is openly evaded. If the law were more stringently acted upon, evasion of the duty could be easily practiced, as a banker, instead of granting a written instrument, could advise his agent privately to pay certain sums to certain parties, according as the agent might be advised.
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