Business Productivity

Overseas supplier payment options

- April 7, 2015 3 MIN READ

There are a number of different overseas supplier payment options that can be used when dealing with an overseas supplier.

There are many overseas supplier payment options, but these are the main methods I have used or know about.

L/C (Letter of credit)

There are a few different versions of this, but generally payment is effected directly from your bank to the bank of the supplier, only after all the relevant documentation and any requirements have been fulfilled.

This option would normally be used for purchases in the container load (or more), as you have the direct involvement of banks and the associated fees that go with that.

This payment method can get quite complex and involve providing securities to your bank, and for this reason it is probably more suited to regular and large quantity buyers.

TT/IMT (Telegraphic transfer/international money transfer)

This is a payment made by you from your bank to the bank of the supplier. It would generally be an international transaction, which involves a change in currency. For example, most Chinese suppliers work in US dollars (USD). If I am in Australia, I go to my bank, arrange a TT for say USD 100. The bank will work out the exchange rate and transfer the equivalent of Australian dollars (AUD) into USD, deduct that from my account and forward the funds to the receiver bank in China. This can take a few days for the transaction to be completed. 

Western Union (WU)

This is a payment method that is generally good for small amounts. You can send money to just about anyone anywhere. There are WU agents all over the place.

The benefits of this method is that it is convenient, quick and cost effective. However, you will also find many scams using this method of payment because it offers no security of your money once it has been sent. You definitely need to be confident of your supplier before using this payment method. 


This is an electronic payment system allowing payments to be sent electronically via the internet. It is a popular way of sending payments and is perceived to be a safer method as there are some controls over how and when the money is paid out.

I have never used PayPal, but I have heard that even with its added security, people have been scammed using it. 


With Escrow the payment is given to a third party (escrow company) and they hold the money until all the contractual obligations between two parties are completed. They then pay out as per the arrangement.

Note: Many manufacturers will not use PayPal or escrow as a payment method because the money is not available until the goods are completed and often they will want access to the funds to purchase materials for the order. Additionally, PayPal especially is renowned to favour the buyer in case of any dispute. For me at least, not accepting these payments has never been a deal breaker.

It certainly pays to shop around due to the different charges. For example, there are foreign exchange companies who will offer a service similar to banks for sending a TT and their rates and fees are often as good, if not better, than the banks.

I would say that in my dealings I use TT (30 percent deposit with balance payable before shipment of the goods) about 95 percent of the time. For smaller amounts (a few hundred dollars) I will opt for WU because it is a much cheaper option for me. The difference for me between TT and WU in the application fee can be around 30 dollars per transaction so it does add up over time.

No payment is ever 100 percent safe, so regardless of the method, do adequate checks of your intended supplier to be confident in them, that way the choice of payment is not as important.

What are your thoughts on these overseas supplier payment options?