Technical Overdraft: What Is This?
The short-term bank credit is given in case of absence of available funds. The simplest exit is the overdraft – granting to the client of money by crediting of its settlement account. That is, even if on your current remainder there are not enough means for service or goods payment, the bank can “occupy” to you a certain amount.
The bank can give to borrowers following kinds of an overdraft: standard, advance, under collection and technical. We will dwell upon last kind.
The technical overdraft is given to the client under the payments arranged into its account, without its financial position. It can be purchasing or currency sale at a stock exchange, return of a time deposit or any other warranted receipts reflected on the account at the borrower.
Feature of existence of payment systems can write off the sum exceeding an admissible bank limit from the client card. In that case there is a technical overdraft which name is prohibited.
Basic reasons of origin of technical overdraft are the following:
1. Operations have been produced in an offline mode and didn’t prove to be true bank. As a result to the client will sell goods or service even in case there are not enough means on the account of client.
2. Currency rate fluctuations. We will admit that the client had been made purchasing in currency which differs from currency on the card account. During transaction the payment system recalculates the purchasing sum at a current rate. The moment of final settlements with bank after a while has come. The exchange rate has strongly changed and the sum to write-off has increased many times over, has exceeded a remainder on the card client’s account or in general a credit limit.
3. Carrying out of operations with credit cards in the presence of current transactions which aren’t confirmed with status HOLD. Counting an accessible limit for the client, the bank doesn’t consider in it the sum of unconfirmed current transactions. In case of write-off of the sums from earlier unconfirmed operations after exhaustion by the client of an accessible credit limit, there is a technical overdraft.
For reception of an overdraft by the legal bodies they should give a standard packet of documents in bank: inquiries from banks about the open account, confirmation of credit turnovers for the last half a year or confirmations of absence of credit indebtednesses in other banks.
To receive a technical overdraft, it is necessary for the legal bodies to prepare the following documentation. The request for granting of the given kind of an overdraft with the description of made operation which will lead to receipt of money funds on the settlement account (up to instructions of date of receipt of means), and also a copy of the agreement, payment orders, documents which can authentically testify to operation of receipt of means in the request.
Features of a technical overdraft are following:
1. The client is obliged not less than once in a month completely to extinguish indebtedness under an overdraft by means of transfer of means for the account.
2. Charge of percent is performed on an indebtedness actual amount under the credit; therefore, if receipts of money are regular, the borrower saves on interest expenses.
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