Work out letter of credit margin instantly with clear inputs, formula shown and shareable results.
Banks require a cash margin against a letter of credit, blocking working capital for the LC's life. The real cost is the gap between your cost of capital and the deposit rate earned on that blocked cash — an expense usually missing from the fee schedule.
Margin carry cost
Margin = LC value × margin %; net cost = margin × (cost of capital - deposit rate)
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.
Yes, with a stronger credit assessment, collateral or a track record of clean LC performance.
It is released once the LC is settled or expires and the liability is extinguished.