The significance of traditional documented trade in the dynamic world of international trade, tools such as documentary credits, or letters of credit (LCs), is becoming increasingly important. LCs provide the sector security and confidence in cross-border transactions as we traverse challenging macroeconomic landscapes and unstable geopolitical environments. Examining its mechanics, advantages, and development as a reliable financial tool, this chapter explores the indispensible role LCs play in world commerce. It begins by asking, "How does a letter of credit work?" to clarify how the guarantee of payment helps buyers and sellers reduce risks.