Credit Sweep

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Credit Ticket

    In accounting and bookkeeping, a credit ticket is a transaction ...
  2. Zero Balance Account - ZBA

    A checking account in which a balance of zero is maintained by ...
  3. Account

    1. An arrangement by which an organization accepts a customer's ...
  4. Sweep Account

    A bank account that automatically transfers amounts that exceed ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Readvanceable Mortgage

    A mortgage feature that allows the borrower to re-borrow the ...
Related Articles
  1. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  2. Investing Basics

    Understanding The Cash Conversion Cycle

    Find out how a simple calculation can help you uncover the most efficient companies.
  3. Investing

    Where do companies keep their cash?

    If you have ever looked over a company's balance sheet, you have no doubt noticed the first account under the current asset section is cash and cash equivalents. The cash account contains, as ...
  4. Retirement

    How can a reverse mortgage help wealthy and poor retirees?

    Learn about the ways a reverse mortgage can help both wealthy and poor retirees by allowing them to borrow against their home equity.
  5. Credit & Loans

    Does every inquiry affect a credit score?

    Check a credit report to prevent an overabundance of hard inquiries and to obtain an overall picture of your credit score's health.
  6. Home & Auto

    What are the differences between revolving credit and a line of credit?

    Understand how to differentiate between a line of credit and a revolving credit account, and find out why business owners open revolving credit accounts.
  7. Credit & Loans

    How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit score.
  8. Credit & Loans

    What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of borrowing funds.
  9. Credit & Loans

    What’s the difference between overdraft protection and overdraft settings?

    Learn what overdraft settings are, how they impact your relationship with your bank and how they govern the overdraft protections on your demand accounts.
  10. Credit & Loans

    What is the difference between overdraft and cash credit?

    Learn about the uses of the terms ''overdraft'' and ''cash credit,'' and how they represent different financial arrangements for borrowing funds from a bank.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center