What is irrevocable letter of credit and revocable letter of credit?

An irrevocable letter of credit is a financial document that cannot be altered or canceled without the consent of all parties involved, providing a strong guarantee to the beneficiary that they will receive payment as long as they meet the specified terms. In contrast, a revocable letter of credit can be modified or canceled by the issuer at any time without the beneficiary's consent, which offers less security to the party receiving the credit. Irrevocable letters of credit are commonly used in international trade to ensure payment reliability, while revocable letters of credit are less frequently used due to their inherent risks.