In accordance with the usual banking custom the paying agent deducts his commission at the time pay ment is made to the holder of the letter of credit, but should the letter of credit request him to make pay ments without deduction, his commission is added to the amount of the draft when forwarding it for re demption to the branch or correspondent of the issu ing bank named in the letter of credit. If the letter of credit is not drawn in local currency, the paying agent makes payment at a rate of exchange which in cludes his commission.
The banker who pays the draft, exhausting the let ter of credit, forwards it to the central agent together with the draft for redemption.
Advised or restricted letters of credit are similar in form to circular letters of credit, except that they are advised direct to the correspondents to whom they will be presented for payment, and specimen signatures of the holder are forwarded to these correspondents, so that a letter of indication is unnecessary.
Letters of credit are available for the period speci fied thereon only (generally twelve months or less), and paying agents should always take care to see that this period has not expired when a letter of credit is presented to them for negotiation.
14. Circular motes.—Circular notes (often written in French) are similar in form, payment and redemp tion to travelers' checks. They are issued for fixed even amounts of a given currency (pounds sterling, dollars, etc.), and are payable at that amount with out deduction in countries which use that currency.
In countries where the local currency differs from that designated on the circular notes, the equivalent of the amount is paid at the current rate of exchange. The amounts of local currencies to be paid to the holder are not specified on the face of the note, and this constitutes the chief difference between circular notes and travelers' checks (see Figure 9b).
15. Foreign money orders.—There is no cheaper, safer or more convenient means of remitting small sums of money to any part of the world than that of foreign money orders (Figure 10) . They are usu ally drawn in sterling, the maximum amount of any one order being limited to, say, £25. For amounts in excess of this sum it is cheaper and more conve nient to purchase a draft.
16. Payment of orders.—Foreign money orders are not usually advised to the paying agents, but the issuing bank, as a rule, holds the paying agents of their foreign money orders free from responsibility in cashing them, provided: (a) The money orders are drawn on the proper form.
(b) The amount of any one money order does not exceed the limit fixed by the issuing bank.
(c) The signatures of the officers on the money or der agree with the specimen signatures of authorized signing officers on file.
(d) The money order is presented for payment within, say, twelve months of the date of issue. (After the expiration of this period the money orders are payable only at the head office of the issuing bank.) 1