Safe Payment Methods: TT vs. L/C vs. Escrow

Executive Summary: Choosing the right payment method depends on your relationship with the supplier and the order volume. T/T is standard but risky. L/C is safe but expensive. Escrow is good for small orders but disliked by big factories.

Table of Contents

• [The Golden Rule: 30/70 Terms](#the-golden-rule-3070-terms)
• [Telegraphic Transfer (T/T): The Industry Standard](#telegraphic-transfer-tt-the-industry-standard)
• [Letter of Credit (L/C): For High Rollers](#letter-of-credit-lc-for-high-rollers)
• [Escrow / Trade Assurance: For Beginners](#escrow–trade-assurance-for-beginners)
• [Checklist: Before You Wire Money](#checklist-before-you-wire-money)
• [FAQ](#faq)
• [Key Takeaways](#key-takeaways)

The Golden Rule: 30/70 Terms

Never pay 100% upfront.

• 30% Deposit: Paid before production starts to buy raw materials.
• 70% Balance: Paid after defect inspection and before shipment (or upon Copy of Bill of Lading for trusted suppliers).

Telegraphic Transfer (T/T): The Industry Standard

T/T is a bank wire. It is fast ($30 fee) and preferred by factories.

• Risk: Once the money is sent, it is gone. If they ghost you, you have no recourse.
• Best For: Established relationships or orders where you have a 3rd party inspector verifying goods before the final payment.

Letter of Credit (L/C): For High Rollers

A bank guarantee. Your bank pays their bank only when clean shipping documents are presented.

• Cost: High bank fees ($500+).
• Complexity: Strict paperwork rules. One typo can delay payment.
• Best For: Orders over $50,000 or new suppliers you don’t fully trust yet.

Escrow / Trade Assurance: For Beginners

Platforms like Alibaba hold the money until you confirm receipt.

• Pros: Conflict resolution mechanism.
• Cons: 2-3% fee. Large factories dislike the cash flow delay and may refuse it.
• Best For: Small orders (<$5000) or sample payments.

Checklist: Before You Wire Money

• Beneficiary Check: Does the bank account name match the Business License?
• Currency: Are you paying in USD or RMB? (RMB transfers within China are becoming more common).
• Reference Number: Include the Proforma Invoice (PI) number in the wire memo.
• Phish-Proof: Verify the account details via a second channel (WeChat/Phone) if they were sent via email. [[INTERNAL:email-security-protocols]]

FAQ

Q1: Can I use PayPal?

A: Only for samples. Fees (4.4%+) are too high for commercial orders, and factories hate the “chargeback” risk.

Q2: What is “Net 30” terms?

A: Paying 30 days after delivery. Very rare. Only possible if you are Apple or Walmart.

Q3: Can I pay in Crypto?

A: NO. Cryptocurrency is illegal in China for business settlements. It signals money laundering and can get your goods seized.

Q4: Who pays the bank fees?

A: The buyer usually covers their bank’s fee (“OUR”), and the beneficiary covers theirs (“BEN”).

Q5: What if the factory asks for Western Union?

A: Massive Red Flag for personal payment. Walk away.

Key Takeaways

• Stick to 30/70: It balances the risk between you and the supplier.
• Verify Accounts: Bank fraud via hacked emails is common.
• Use T/T for Speed: But only after inspection.
• Use L/C for Safety: If the order is massive and the supplier is new.