The instrument of commerce described above is fre-quently confused with the traveler's letter of credit. These two documents differ as to purpose, form, and classification. The former is used to facilitate the movement of goods, while the latter serves as a means of paying the expenses of a person who is journeying from one country to another. The commercial letter of credit is addressed by the issuing bank to the beneficiary, who is authorized to draw his drafts, while the traveler's letter is addressed by an issuing bank to another institution, which is requested to honor the demand drafts drawn by the traveler on the issuer up to a specified amount and before a fixed date. A bank usually issues a traveler's letter of credit upon payment of the full amount by the beneficiary, in advance, or it may receive reimbursement only as each outlay is made by the traveler. As noted above, commercial letters of credit were classified fundamentally on a basis of whether or not they can be canceled without the consent of the beneficiary. This question never enters into the issuing of a traveler's credit. The document is classified rather according to the number of banks which are requested to act as payers. The traveler's letter of credit may be addressed to only one bank, and it is then said to be a specially advised form. As travelers letters of credit are frequently lost, this type has the advantages of being easily canceled and of stopping further payment of drafts drawn by persons other than the proper beneficiary. The circular, or general letter of credit gives the traveler the right to negotiate his bills with a number of correspondents, which are at times listed on the letter of credit. Traveler's credits are drawn in dollars, pounds, francs, or any other currencies desired by the beneficiary.

The traveler's letter of credit is of advantage to all parties concerned. The traveler is furnished with the current funds for his journey, thus eliminating the risk of carrying a supply of cash, and at the same time the letter also serves as a dignified introduction from his bank. This institution collects a commission on the total amount, and also has use of the funds until they are actually expended by the traveler. The foreign correspondent bank which negotiates the drafts usually buys them at a rate lower than the market price, and thus gains a profit on the exchange.