Definition of Overdraft Cap

Overdraft Cap is a maximum dollar limit that a standard bank sends to another standard bank in one day.

Brief Explanation of Overdraft Cap

The overdraft cap boundaries the amount that banking institutions sends via private payment or the Fed wire network. This cap limits a lender’s daylight-overdraft exposure.

The overdraft account cap varies from one standard bank to another. It is a multiple of each lender’s risk-based capital. The cap is applicable not only to banking institutions but also to banking institutions, broker firms, and lending institutions, as well as other banking institutions.