Types of bills of exchange and their characteristics

A bill of exchange is a bill issued by the drawer and entrusts the payee to unconditionally pay a determined amount to the payee or holder at sight or on a specified date. Money orders can be classified into various types based on different criteria.

Divided according to different drawers

Bills of exchange can be divided into bank drafts and commercial drafts. A bank draft is a written payment order issued by one bank to another bank. The drawer and payee are both banks. The credit basis of bank draft is bank credit. A commercial bill of exchange is a bill of exchange issued by a company, enterprise or individual, and the payee can be a company, enterprise or individual, or it can be a bank. The credit basis of commercial bills is commercial credit, and the payee or holder bears greater risks. However, by accepting commercial bills, especially by banks, the risk of the payee or holder can be reduced.

Divided according to whether documents are attached

Bills of exchange can also be divided into bright drafts and documentary drafts. A clean bill refers to a bill of exchange that does not come with any shipping documents, and bank drafts are mostly clean bills. Documentary draft refers to a draft with relevant documents attached. Documentary draft is generally a commercial draft. The circulation, transfer and financing of documentary bills of exchange are not only related to the credit of the parties, but also depend on the quality of the documents.

Divided according to different payment times

Bills of exchange are divided into sight bills and usance bills. A demand draft is a draft that is payable immediately upon presentation or sight. A usance draft is a draft that is payable within a certain period of time or on a specific date in the future. According to the record on the payment date on the bill of exchange, there are three types of long-term bills: bill of exchange for periodic payment after the date of issue, bill of exchange for periodic payment after the date of sighting and bill of exchange for fixed date payment. Usance drafts must be accepted by the drawee to determine their liability for payment.

Divided according to different acceptors

Bills of exchange can be divided into Bank Acceptance Bills and Commercial Acceptance Bills. Bank acceptance bill refers to a usance bill in which both the payee and the acceptor are banks. Bank acceptance bills are based on bank credit. Commercial acceptance bill refers to a usance bill accepted by a company, enterprise or individual. Commercial acceptance bills are based on commercial credit.

Divided according to different circulation scopes

Bills of exchange can be divided into domestic bills of exchange and foreign bills of exchange. Domestic bills of exchange refer to bills of exchange whose circulation scope is limited to a certain country. Foreign bills of exchange refer to bills of exchange that are circulated in two or more countries.

The above is a classification of bills of exchange based on different standards. Understanding these classifications will help you better understand the characteristics and uses of bills of exchange.