A Letter of Credit is a letter issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.A Letter of Credit is also known as a documentary credit or bankers commercial credit, or letter of undertaking, Disclaimer Our content is not in any way legal advice or binding. The information provided by might not be the official legal or full definition. Also when pursuing a specific transaction you are encouraged to conduct your own due diligence and to consult legal counsel as appropriate.