Definition of Overdraft cap:
An overdraft cap is the maximum dollar limit that a bank may send to another financial institution (FI) in one day. The cap constrains the amount a bank can overdraw its Federal Reserve account to make Fedwire payments, a real-time gross settlement (RTGS) system of central bank money used by Federal Reserve Banks to transfer funds electronically between member institutions.
The overdraft cap is also known as the net debit cap.
A deficit in a bank account caused by drawing more money than the account holds.
The maximum amount of money that one financial institution will transfer to another financial institution in one day; it limits the institutions daylight overdraft exposure. This cap is intended to lessen the risks associated with monetary transfers. These interbank overdrafts are monitored by the Federal government.
Synonyms of Overdraft cap
How to use Overdraft cap in a sentence?
- When I left Cambridge I had a £900 overdraft.
- Some banks can continue withdrawing money even when their Federal Reserve accounts are empty, provided that balances are replenished by the end of the day.
- The overdraft cap is the maximum dollar limit that a bank may overdraw its Federal Reserve account each day to make Fedwire payments to other financial institutions (FIs).
- Overdraft limits vary, depending on a bank's financial position, and are set for a period of one year.
- The Federal Reserve is armed with several tools to deal with violations, including counseling measures, amending caps, and, in serious cases, closing accounts.
Meaning of Overdraft cap & Overdraft cap Definition