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The main difference between TT (Telegraphic Transfer) and CAD (Cash Against Documents) is when the buyer pays and how much security each party has.Feature TT (Tele

graphic Transfer) CAD (Cash Against Documents)Full Meaning Telegraphic Transfer (wire transfer) Cash Against DocumentsPayment Timing Before shipment, after shipment, or as agre
ed Buyer pays when the bank presents the shipping documentsBank's Role Transfers money between buyer's and seller's banks Holds the shipping documents until the buyer paysShipp
ing Documents Seller may send directly or through the bank Documents are sent through the banksRisk to Seller High if payment is after shipment; low if paid in advance Lower th
an open account because the buyer must pay to receive the documentsRisk to Buyer High if payment is made before shipment Lower because payment is made after the goods have been
shipped and documents are availableCost Usually lower bank charges Higher bank charges than TT because banks handle the documents1. TT (Telegraphic Transfer)TT is an electroni
c bank-to-bank transfer of funds.Example (100% Pre-payment)Buyer places an order.Seller issues a Proforma Invoice (PI).Buyer transfers the money by TT.Seller receives the payme
nt.Seller ships the goods.Buyer receives the shipping documents.Example (30% Advance + 70% Before Shipment)Order value: USD 50,000Buyer pays:30% (USD 15,000) in advance by TT.7
0% (USD 35,000) before shipment (or as agreed).Advantages of TTFor the SellerFast payment.Lower banking costs.Better cash flow.For the BuyerSimple process.Quick transaction.Com
monly accepted worldwide.2. CAD (Cash Against Documents)CAD means the seller ships the goods first, then sends the shipping documents to the buyer's bank. The buyer must pay be

for

e the bank releases the docume

nts.Without the original shipping documents (such as th

e Bill of Lading for sea freig

ht), the buyer generally
cannot take possession of the goods.CAD Proce
ssBuyer places an order.Seller ship
s the goods.Seller sends the sh
ipping documents through t
heir bank.The seller's bank forwards the

documents to the buyer's bank.The buyer pays th

e bank.The bank releases
the documents

to the buyer.The buyer uses the docum
ents to clear customs and collect the goods.ExampleO

rde

r Value: USD 100,00

0Under CAD:Seller

ships the goods
first.Seller sends th
e documents through

the banks.The bu

yer pays USD 100,
000 when notified th
at the documents have arrived.

The

bank releases the documents afte

r payment.TT vs CAD TimelineTT (Pre-payment)Buyer Orders ↓Seller issues PI ↓Buyer pays ↓Seller ships goods ↓Buyer receives goodsCADBuyer Orders

↓Seller ships goods ↓Seller sends documents to bank ↓Buyer pays the bank ↓Bank releases documents ↓Buyer receives good

sWh

ich is safer?F

or Better Option ReasonSe
ller TT (Pre-payment) Sell
er receives payment before shipping.Buyer CAD Buyer pays o
nly after the goods have been shipped and the shipping documents
are available.Simple Compa
risonQuestion TT CADWho pays first? Usually the
buyer (if pre-payment is agreed). Seller ships first; buyer pays when d

ocu

ments arr

ive at the bank.When are goo

ds shipped? Of

ten after payment (if pre-payme
nt). Before payment.Are banks involved in handl
ing shipping documents? Usually no (unless separately arranged). Yes, banks
handle the shipping documents.Is it faster? Yes

. S

lightly slower becau

se documents pass th

rough b
anks.Importa
nt Note
CAD is not the s
ame as
a Letter o
f Credi
t (LC).In CAD, the
banks
handle the documents
, b

ut they

do not
guarantee p
ayment
to the seller.In a
n LC, t
he issuing bank undertakes to
pay the
seller if the sell
er pres
ents documents that com
ply wit
h the LC terms.So, i
n t

erm

s of seller prote

ction:TT (100% pre-payment) → Highest protection for the sellerLC → Strong protection for both parties (if properly structu
red)CAD → Moderate protectionOpen Account → Lowest protection for the seller