What Is Telegraphic Transfer (T/T)?
Telegraphic Transfer (T/T), also known as wire transfer, is a fast and direct payment method widely used in international trade. It involves the remitter (usually the importer/buyer) instructing their bank to transfer a specified amount of money electronically to the beneficiary’s(usually the exporter/seller) bank account.
Unlike letters of credit (L/C) that rely on bank guarantees, T/T is based on the buyer’s willingness to pay and the trust between trading parties. It leverages modern banking networks (e.g., SWIFT, the Society for Worldwide Interbank Financial Telecommunication) to ensure funds are transferred securely and efficiently across borders.
How Does T/T Work in International Trade? (Typical 5-Step Process)
Agree on Payment Terms: The buyer and seller negotiate and confirm T/T as the payment method in their trade contract (e.g., “30% advance T/T, 70% balance T/T against copy of B/L”).
Initiate Payment (if advance payment): If an advance payment is required, the buyer submits a T/T application to their bank (remitting bank), providing details like the seller’s bank name, account number, SWIFT code, and the transfer amount. The buyer also pays the bank’s service fees.
Bank Processes the Transfer: The remitting bank verifies the buyer’s account balance and processes the request. It sends an electronic payment instruction to the seller’s bank (beneficiary bank) via secure networks (e.g., SWIFT).
Beneficiary Bank Credits the Account: The beneficiary bank receives the instruction, verifies the details, and credits the corresponding amount to the seller’s bank account. It then notifies the seller that the funds have been received.
Final Payment (if balance due): For balance payments (e.g., after goods are shipped), the seller provides the buyer with required documents (e.g., copy of Bill of Lading, commercial invoice). The buyer checks the documents and initiates the remaining T/T payment, following the same electronic transfer process.
Key Features of T/T
| Advantages | Disadvantages |
| Fast fund transfer (usually 1-3 business days, depending on bank locations) | No bank guarantee for the seller – if the buyer refuses to pay after goods are shipped, the seller may face non-payment risks. |
| Low transaction costs compared to L/C (only bank service fees apply, no complex documentation fees). | Relies heavily on trust between parties – new or untrusted partners may be hesitant to use it. |
| Simple process with minimal documentation (no need for strict document compliance like L/C). | Exchange rate fluctuations can affect the actual amount received by the beneficiary, as funds are converted during the transfer. |
Common T/T Payment Terms in Trade
Advance T/T (100% or Partial): The buyer pays all or a portion of the total amount before the seller ships the goods. This is most favorable for the seller (low risk).
Balance T/T Against Documents: The buyer pays the remaining amount after receiving and verifying copies of shipping documents (e.g., B/L copy), ensuring the seller has fulfilled shipment obligations.
T/T After Arrival of Goods: The buyer pays after inspecting the goods upon arrival at the destination port. This is most favorable for the buyer but carries high risk for the seller.
Applicable Scenarios
Trade between long-term, trusted partners (where mutual trust reduces payment risks).
Small to medium-sized trade orders (cost-effective compared to L/C for low-value transactions).
Urgent transactions (e.g., time-sensitive goods) where fast fund transfer is critical.
Transactions where both parties prefer a simple, flexible payment method over complex L/C procedures.
Post time: Aug-26-2025
