The important difference between an ordinary documentary credit and a standby documentary credit is that an ordinary documentary credit is most often used as intended, i.e. to mediate the exchange of documents and payments between buyer and seller, while in contrast, the standby documentary credit is not expected to be used.
The standby documentary credit will be used only if something should go wrong between the buyer and seller and the expected payment does not take place.
The standby documentary credit can also be compared to a bank guarantee in many respects. The advantage of a standby documentary credit is that it is subject to the international documentary credit rules (UCP 600) or the standby rules (ISP98), whereas international guarantees are not subject to a common set of rules to the same extent.