Trading TermsOption Artificial Intelligence Covered Write Credit risk insurance Shareholder of Record Correlation Coefficient
Back to back (or head and counter) credit
A documentary credit, also known as a counter credit, is a financing tool used by a seller, or importer, to purchase goods necessary to fulfill a sale covered by the original credit. This arrangement allows the importer's bank to use the first credit as collateral. The importer, as the applicant for the second credit, is liable for reimbursing the bank for any payments made, regardless of whether the original credit is paid or not. It is important to note that this type of credit is different from a transferable credit.
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