CREDIT, LETTER OF. This is the term applied to accounts, usually in the form of a letter, addressed by one party to another, whereby the former requests the latter to pay a stun therein specified to the bearer of the letter, or some other third party named in it, and authorizes him to reimburse himself for such payment, either by debiting it in account betweenthe parties, or by drawing on the first party for the amount. This arrangement may take place between merchants or others, but in general it occurs between bankers residing in different places—as, for example, between a banker in Edin burgh and his correspondent in London; and it is designed for enabling a party who has money lodged at either place, to obtain the use of it at the other, without the risk or trouble of actually carrying it between the two cities. For this convenience, a small charge is made by the bank issuingthe letter, termed the exchange or commission. Sometimes the letter is addressed to all or several of the correspondents of the bank issuing it, in which case it is termed a circular credit; and any of them may pay the sum mentioned, or sums to account as desired, taking the holder's receipt, or his draft on the granter, in exchange; and the sums so paid are indorsed on the letter, to show how far the credit has been used. If the party holding a circular letter can be properly introduced, even at a place where the granter has no correspondent, little difficulty will be experi enced in obtaining money upon it; and the practice is to reimburse any one who has given the money, if within the amount of the credit. It will thus appear that the sys
tem is productive of much convenience to all parties who have occasion to travel, or transact business away from home, especially in foreign countries, where it might be difficult otherwise to make their way, except by carrying with them an unsafe amount of coin or other valuables.
Some bankers, having an extensive correspondence abroad, issue what are called circular notes, usually of the value of £10 or £20 each, which any of the granter's cor respondents, or indeed any one else, may cash to the holder, on his " indorsation ;" but it third party must take his risk of its being questioned. For this kind of credit, the receiver at once reimburses the granter; whereas for the ordinary letter of C., he is only reimbursed when the drafts under it are advised to him, the holder continuing during the interval to raise interest on his money deposited for covering it. The circular-note plan was devised about 1770 by Mr. Berries, the founder of the eminent London bank of Herries, Farquhar & Co., who had originally been a continental merchant, and well knew the difficulties which travelers or traders then had to encounter in foreign countries. Although the system is now highly appreciated, it cost him no little trouble and perseverance to establish it in public estimation. See Cincuian NOTES.