Daylight overdrafts that are not eliminated by the end of the Fedwire day become overnight overdrafts. Overnight overdrafts pose a greater risk to the Reserve Banks than do discount window loans because there is no assurance that overnight overdrafts would be collateralized. To minimize Reserve Bank exposure to overnight overdrafts, the Board established a policy to discourage institutions from incurring overnight overdrafts by charging a penalty fee. 

Effective July 20, 2023, the Board incorporated the policy on overnight overdrafts into the Federal Reserve Policy on Payment Risk (PSR policy). For additional information, please see the PSR policy available on the Board’s public website at

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Last Update: July 21, 2023