Overdraft Cap


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.

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.


Investment dictionary. . 2012.

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