By SupplierVerify Team | Published: April 16, 2026
"How should I pay my Chinese supplier?" It's one of the first questions every new importer asks, and the answer can save you thousands — or cost you everything. Chinese suppliers typically propose payment terms that favor them. Your job is to understand the options well enough to negotiate terms that protect you. Here's a complete breakdown of T/T, L/C, OA, and DP — what they mean for your risk, your cash flow, and your negotiating position.
T/T is simply a bank wire transfer. It's the most common payment method for China sourcing because it's fast (1–3 business days), inexpensive ($15–$50 in bank fees per transfer), and universally accepted. The standard structure for a first order is 30% deposit, 70% balance before shipping — you send 30% to start production, and the remaining 70% when the goods are ready and you've seen proof (photos, video, or a third-party inspection report).
The risk with T/T is simple: once the money leaves your account, getting it back requires the supplier's cooperation — or a court order. There is no built-in buyer protection, no escrow, no dispute mechanism. You are relying entirely on the supplier's willingness to deliver. This is why supplier verification before payment is non-negotiable with T/T — once you wire, your leverage is gone.
A Letter of Credit is a bank-guaranteed payment instrument. Your bank issues an L/C that promises to pay the supplier once they present documents proving they shipped the goods as specified. The supplier's bank confirms the L/C and the supplier ships knowing payment is guaranteed if they meet the terms. L/Cs offer the strongest buyer protection because: the bank, not you, is the one promising to pay — and banks don't pay unless documentary conditions are strictly met; the supplier only gets paid after proving they shipped compliant goods; and fraud risk shifts from "will the supplier ship?" to "will the supplier present forged documents?" — which is rarer and easier to dispute.
The downsides of L/Cs: cost — bank fees typically run 0.5–1.5% of the transaction value plus fixed charges ($100–$500), not cheap for orders under $50,000; complexity — L/Cs require precise documentation (commercial invoice, bill of lading, packing list, certificate of origin, inspection certificate — exact requirements vary by L/C terms), and any discrepancy lets the bank refuse payment; and Chinese suppliers often dislike L/Cs — many small and mid-sized factories find them burdensome and prefer T/T. An L/C is most appropriate for orders above $50,000, first-time supplier relationships, or when you're buying custom products with long lead times.
Open Account terms mean the supplier ships the goods and you pay later — typically Net 30, Net 60, or Net 90 days after shipment or receipt. This is the most buyer-friendly payment method because you receive and inspect the goods before paying. It's also the method that gives Chinese suppliers the most heartburn — they're extending credit to a foreign buyer with limited recourse if you don't pay. OA terms are rare for first-time buyers. Chinese suppliers typically only offer OA to: established buyers with a multi-year relationship and clean payment history, large-volume buyers who have negotiating leverage, and buyers who have passed the supplier's own credit assessment. If a brand-new, unverified supplier eagerly offers you OA terms, be suspicious — it can be a tactic to build trust before a large-order scam.
DP is a bank-intermediated payment method that sits between T/T and L/C. The supplier ships the goods and gives shipping documents (bill of lading, invoice, etc.) to their bank. The supplier's bank sends the documents to your bank. Your bank releases the documents to you — allowing you to take possession of the goods — only after you pay. The advantage for buyers: you don't pay until the goods have shipped and the documents are at your bank. You can verify shipment before releasing funds. The advantage for suppliers: the shipping documents serve as leverage — if you don't pay, you don't get the documents and can't claim the goods. DP is less expensive than L/C (lower bank fees) but offers less protection — the bank checks that documents exist, not that they're accurate or that the goods match the description. If the supplier ships bricks in a box with technically correct documents, DP won't protect you. DP works best as a compromise when the supplier refuses T/T's standard 30/70 terms and you don't want the cost and complexity of an L/C.
| Method | Buyer Risk | Cost | Best For |
|---|---|---|---|
| T/T (30/70) | Medium — deposit at risk if supplier fails | $15–$50 per transfer | Most orders $1,000–$50,000 (most common) |
| L/C at Sight | Low — bank guarantees payment only against compliant docs | 0.5–1.5% + $100–$500 | Orders $50,000+ or high-risk suppliers |
| DP | Medium-Low — pay after shipment, docs as leverage | $50–$200 | Mid-value orders, compromise option |
| OA | Very Low — pay after receiving goods | Minimal | Established relationships, large buyers only |
| Alibaba Trade Assurance | Medium — platform dispute resolution | Free (included) | Alibaba orders only; limited coverage |
Chinese suppliers ask for large deposits for legitimate reasons: raw material costs must be paid before production starts, custom or branded products have no resale value if you cancel, and the deposit commits the buyer — reducing the risk that you'll walk away mid-production. But the same deposit structure is also the mechanism that enables most China sourcing scams. The scammer's business model depends on getting a deposit and delivering nothing. This is why the single most important payment rule in China sourcing is: never send a deposit to a supplier you haven't independently verified. The payment method matters less than the counterparty. A verified, legitimate supplier paid by T/T is safer than an unverified Gold Supplier paid through any method.
No payment method can protect you from a supplier who intends to defraud you. L/Cs protect against non-compliance with documents, not against clever forgery. Trade Assurance protects against clear contract violations, not against quality disagreements. T/T offers no protection at all once the money has left your account. The only reliable protection is to verify the supplier before you send money. Check the business license. Search court records. Confirm the factory exists. Compare their pricing to the domestic market. If you do that work upfront, you can pay with confidence using whichever method fits your cash flow. If you skip it, no payment method is safe enough.
Before you negotiate payment terms, know who you're negotiating with. Our Safety Shield report verifies the supplier's business license, legal history, and operational status. For orders over $10,000, Reality View sends an inspector to the factory. Negotiate from a position of knowledge, not trust.
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