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
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    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 >>
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    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
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