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.

BREAKING DOWN 'Daylight Overdraft'

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

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RELATED FAQS
  1. Are my investments insured?

    No. Whenever you invest in a stock, bond or mutual fund, there is no insurance against the possible loss of your initial ... Read Full Answer >>
  2. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  3. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  4. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  5. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  6. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>

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