Daylight Overdraft

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DEFINITION of 'Daylight Overdraft'

Occurs when a clearinghouse bank issues a payment during the day that is in excess of the originator's reserve account balance. Daylight overdrafts must be covered by the end of the business day.

INVESTOPEDIA EXPLAINS 'Daylight Overdraft'

In order to encourage banks to manage and reduce potential default risks, the Federal Reserve Board assesses a charge for daylight overdrafts.

RELATED TERMS
  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Overdraft Cap

    The maximum dollar limit that a bank will send to another financial ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
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