An arrangement in which one irrevocable letter of credit serves as the collateral for another; BLC Bank, the advising bank of the first letter of credit becomes the issuing bank of the second letter of credit.

In contrast to a transferable letter of credit, permission of the ultimate buyer (the applicant) or that of the issuing bank, is not required in a back-to-back letter of credit. It is used mainly by intermediaries to hide the identity of the actual supplier or manufacturer. Back to back credits are also called counter credits or reciprocal letters of credit.