Overdraft Cap


DEFINITION of 'Overdraft Cap'

The maximum dollar limit that a bank will send to another financial institution in one day. The overdraft cap limits the amount that banks will send via private payment or the Fedwire network. This cap limits a bank's daylight-overdraft exposure.

BREAKING DOWN 'Overdraft Cap'

The overdraft cap varies from one bank to another. It is a multiple of each bank's risk-based capital. The cap applies not only between banks but also between banks, brokerage firms and credit unions, as well as other financial institutions.

  1. Daylight Overdraft

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  2. Demand Draft

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  3. Bounced Check

    A slang word for a check that cannot be processed because the ...
  4. Overdraft

    An extension of credit from a lending institution when an account ...
  5. Fedwire

    A real-time gross settlement system (RTGS) of central bank money ...
  6. Remittance

    The term most commonly refers to money being sent via mail or ...
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