Question

Which of the following is not a letter of credit?

• A. Cheque
• B. Bank draft
• C. Overdraft
• D. Promissory note

Hint:

A \textbf{letter of credit} ensures payment security in international trade, whereas an \textbf{overdraft} is a loan facility allowing withdrawals beyond available balance.

Answer 1

The Correct Option is C

A letter of credit is a financial instrument issued by a bank guaranteeing that a buyer’s payment to a seller will be received on time. However, an overdraft is a facility that allows an account holder to withdraw more money than is available in their account, making it different from a letter of credit.