LC Cost Calculator
The LC Cost Calculator estimates the full cost of a Letter of Credit: issuance, confirmation, negotiation, amendment and SWIFT/courier fees, plus usance interest. Charges follow UCP 600 practice and the currency's day-count basis. Enter your LC value and tenor below to see the all-in cost and net proceeds.
A standard sight LC for USD 500,000 at 90 days typically costs USD 2,000–2,500 all-in: issuance (~1% p.a. pro-rated = ~USD 1,250), negotiation (0.15% = USD 750), and advising/SWIFT/courier flat fees (~USD 175). Add USD 375–1,000 if confirmation is required.
This calculator covers all bank fee types - issuance, confirmation, negotiation, advising, SWIFT/courier, amendments, discrepancies, and usance discounting - and applies the correct ACT/360 (USD/EUR/AED) or ACT/365 (GBP/INR) day-count automatically. Results are shareable via URL. See the full LC cost guide or check how LCs work.
Fee breakdown by charge type
- Issuance: 0.125%–0.5% per quarter or part thereof, charged by the issuing bank to the applicant.
- Confirmation: 0.1%–2.0% p.a., varies by country risk and issuing bank tier.
- Negotiation: Usually 0.125%–0.15% with a minimum (e.g. USD 100).
- Advising: Flat USD 50–150 at the advising bank.
- Discrepancy fee: USD 75–150 per discrepant presentation set. Use the LC Discrepancy Auto-Scanner before presenting to avoid this charge.
Numerical Example: US$ 500,000 LC, 90 days: with and without confirmation
Standard bank fee tiers for a USD 500,000 transaction. Excludes amendment and discrepancy charges. Use the calculator below with your bank's actual tariff.
| Line item | Basis | Amount |
|---|---|---|
| Issuance Commission | 1% p.a. × 90d (ACT/360) | $1,250.00 |
| Negotiation Fee | 0.15% | $750.00 |
| Advising Fee | Flat | $100.00 |
| SWIFT + Courier | Flat | $75.00 |
| Total | $2,175.00 |
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UCP 600 Compliance Matrix
Overview & methodology
How banks charge for Letters of Credit
LC costs split between the applicant (buyer) and the beneficiary (seller) per Field 71B of the SWIFT MT700. Issuance and reimbursement fees are charged to the applicant; negotiation, confirmation and discrepancy fees typically fall on the beneficiary. Always reconcile Field 71B with your commercial agreement before opening the LC.
How much does confirmation add?
Confirmation rates range from 0.1% p.a. (top-rated issuing bank in a low-risk country) to 2.0% p.a. (sub-investment-grade issuing country). On a USD 500,000 sight LC for 90 days, confirmation adds USD 375–1,000 to the total cost. Whether confirmation is worth it depends on the issuing bank's credit rating, country transfer risk and your tolerance for bank insolvency risk.
Numerical Example: Sight LC Cost Comparison ($500,000)
Confirmation adds significant cost but protects the seller against issuing bank insolvency or country risk.
Day-count conventions
Annual-rate charges are pro-rated on the money-market convention for the LC currency: ACT/360 for USD, EUR and AED; ACT/365 for GBP and INR. Switching currency in this tool automatically switches the basis.
ICC article references
UCP 600 Article 8 (confirming bank undertaking), Article 14 (standard for examination), Article 16 (discrepant documents and notice), Article 28 (insurance documents), Article 30 (tolerances in credit amount, quantity and unit prices). For usance interest calculations, see the Usance LC Interest Calculator.
Method note: calculations run in your browser using the formulas and published rule books cited on this page. Results are free estimates for planning, with no login required, and should be confirmed with your bank, broker or the official source before you commit.
Frequently asked questions
How much does a letter of credit cost?
A USD 500,000 sight LC for 90 days typically costs about USD 2,000 to 2,500 all-in: issuance around USD 1,250 (1% p.a. pro-rated), negotiation USD 750 (0.15%) and advising, SWIFT and courier around USD 175. Confirmation adds roughly USD 375 to 1,000.
Who pays the confirmation fee on an LC?
Confirmation is usually charged to the beneficiary (seller), because it protects the seller against issuing bank or country risk. Field 71D of the MT700 sets the charge split, so the applicant pays only if the credit says so.
What is the difference between a sight LC and a usance LC?
A sight LC pays on compliant presentation. A usance (deferred) LC pays at a later date, such as 90 days after B/L, so the seller either waits or discounts the accepted draft and pays interest. See the Usance LC Interest Calculator for that cost.
What is ACT/360 vs ACT/365 in LC fees?
They are day-count conventions for pro-rating annual rates. USD, EUR and AED use ACT/360 (actual days divided by 360); GBP and INR use ACT/365. The calculator switches the basis automatically when you change currency.
Does this LC cost calculator replace a bank quote?
No. It estimates costs from typical published fee ranges so you can compare structures. Your bank's tariff, your credit standing and the issuing bank's country risk set the actual charges, so always confirm with a written bank quote.