What is T/T (telegraphic transfer)?
T/T · Telegraphic Transfer
A bank-to-bank wire sent over SWIFT. It is the simplest way to pay for a cargo and the one with the least protection: the money moves on the strength of the relationship, not against documents, and once it has gone it is very hard to recall.
Key points
- A SWIFT wire — no bank undertaking to either party, unlike a letter of credit.
- The split and the trigger are the contract; "payment by T/T" alone means nothing.
- Balance against original bills of lading is far safer than against a copy.
- Fast, cheap and irreversible, which is exactly why fraud favours it.
At a glance
| What it is | Bank-to-bank electronic transfer over SWIFT |
|---|---|
| Also called | Wire transfer (US, Canada); T/T across the UK, Australia and Asia |
| Settlement | Typically 1–3 business days |
| Bank undertaking | None — to either party |
| Common structures | 30/70, 20/80 or 10/90 advance-and-balance; or cash against documents |
| Typical cost | A flat bank fee, not a percentage of cargo value |
| Use with care when | The counterparty is unproven or the parcel is large |
What it actually is
A telegraphic transfer is an electronic payment from the buyer’s bank to the seller’s, almost always routed over the SWIFT network. The name is a fossil — there is no telegraph involved — but it survives in the UK, Australia, New Zealand and across Asia, where "T/T" on an invoice means the same thing a North American counterparty would call a wire transfer.
Settlement typically takes one to three business days. There is no documentary examination, no undertaking by any bank to anyone, and no conditionality: the buyer instructs the payment and the funds move.
How T/T terms are structured
A bare "payment by T/T" says nothing useful. What matters is the split and the trigger. The common shapes are an advance portion with the balance on a stated event — 30% on contract and 70% against a copy bill of lading is a familiar pattern, as are 20/80 and 10/90 — or cash against documents, where the full amount is wired once scanned shipping documents are presented.
The trigger is where the risk sits. Balance against a <em>copy</em> bill of lading means the buyer pays before controlling the cargo. Balance against presentation of originals is materially safer, because the seller cannot release the goods to anyone else once the originals have moved. On a provisionally priced cargo, the T/T is usually made against a provisional invoice with a final balancing payment after the umpire assay.
What a T/T does not protect
Neither side. The buyer’s bank owes the seller nothing, and the seller’s bank owes the buyer nothing. Compare a letter of credit, where the issuing bank is obliged to pay against compliant documents and the seller has a bank’s credit standing behind the trade. A T/T substitutes nothing for anybody.
That cuts both ways. A seller shipping against a promise of payment on arrival carries the buyer’s credit risk outright. A buyer paying 100% in advance to a counterparty it has not traded with before has no recourse at all beyond suing in a foreign jurisdiction for a sum that will rarely justify the cost. Advance-fee fraud in commodities works precisely because T/T is fast, final and irreversible.
When it is the right instrument
T/T is the sensible default between counterparties with a trading history. It is quick, it costs tens of dollars rather than a percentage of cargo value, it needs no facility or cash cover, and it avoids the discrepancy cycle that makes letters of credit slow. For repeat business on modest parcels, insisting on an LC can cost more than the risk it removes.
It becomes the wrong instrument as soon as the counterparty is unproven or the cargo value is large. The practical rule most desks use: a first trade with a new counterparty is done against a letter of credit, or with inspection and assay by an agency the paying party appoints as the payment trigger. Once a relationship has shipped several cargoes cleanly, terms usually migrate to T/T.
Frequently asked questions
- What is the difference between T/T and a letter of credit?
- A T/T is a plain bank transfer with no conditions attached: the buyer instructs it and the money moves. A letter of credit is an undertaking by a bank to pay the seller against documents that comply with the credit. The LC substitutes the bank’s credit for the buyer’s and costs money and time to arrange; the T/T substitutes nothing and is fast and cheap.
- Is T/T payment safe?
- It is as safe as the counterparty, and no safer. There is no bank obligation on either side and a completed transfer is effectively irreversible. Between parties that have shipped together repeatedly it is entirely normal. For a first trade, particularly one requiring a large advance, it carries the whole risk of the transaction.
- What does 30/70 T/T mean?
- Thirty per cent of the contract value is wired up front — usually on signature or before loading — and the remaining seventy per cent on an agreed trigger, most often presentation of shipping documents. The proportions vary; what matters commercially is which event releases the balance and whether the documents involved are copies or originals.
- Can a T/T payment be recalled?
- Rarely. A recall can be attempted through the sending bank, but it depends on the beneficiary bank’s cooperation and on the funds not having been moved on. Treat a sent T/T as final. That is why verification of the counterparty and their bank details belongs before the payment, not after.
Related terms
A bank undertaking to pay the seller once compliant documents are presented. It substitutes the bank’s credit for the buyer’s, which is why it remains the default instrument between counterparties trading together for the first time.
Capital advanced against a future offtake, repaid in product rather than cash. Frequently the fastest funding route for a producing or near-producing mine, and usually less dilutive than equity because the financier is underwriting the commodity and the logistics.
Know Your Customer and Know Your Business: verification of identity, ownership and sanctions status of a counterparty before contracting. A cargo can be frozen mid-voyage over a party that should never have entered the chain.
The document issued by the carrier that serves as receipt for the cargo, evidence of the contract of carriage, and — critically — a document of title. Whoever holds the original endorsed bill controls the goods.
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