The overdraft authorization , also known as overdraft, is a banking provision that makes it possible to alleviate short-term cash flow difficulties .

The overdraft authorization has the particularity of being a credit of indefinite duration, so it has no end unless the bank client terminates his contract. It is generally subscribed to the opening of an account agreement and as any credit it generates interest called agios and calculated quarterly. They should not be confused with intervention fees that bill for transactions made by the customer beyond the overdraft or in his absence. In addition, Article L 313-12 of the Monetary and Financial Code requires that:‘Any open-ended, non-casual, credit facility granted by a credit institution to an undertaking may be reduced or discontinued only upon written notice and upon the expiry of a period of notice fixed at the time of of the competition. This period can not, under penalty of nullity of the contest, be less than 60 days “.

Attention, do not confuse an authorization of overdraft with the facility of cash, which is rather reserved for a professional clientele over a fixed period of three months renewable. In practice, the cash facility usually consists of an advance while waiting for income . If the overdraft facility were to be used more than three consecutive months, the bank would be led either to demand immediate repayment or, if the customer’s situation allows, to make him a offer consumer credit 1 .

Notes and references

  1. ↑ ”  Overdraft authorization and cash facility. – Maître joan dray ”  [ archive ] , on www.legavox.fr (accessed on September 27, 2016 )

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