Credit Sweep

DEFINITION of 'Credit Sweep'

Also known as an automated credit sweep, this term refers to an arrangement between a bank and a customer (usually a corporation) whereby all idle or excess funds in a deposit account are used to pay down short-term borrowing under a line of credit. The client usually sets a target balance which will determine how much of its funds will be used.

BREAKING DOWN 'Credit Sweep'

This is a cash management tool that is especially beneficial to large corporations that have multiple accounts and great variablity in payments from day to day. Most credit sweeps also have the opposite arrangement, whereby if the funds in the account are less than the target balance, there will be a drawdown on the line of credit to reach the target.

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