What is the difference between an overdraft and a cash credit facility?

What is the difference between an overdraft and a cash credit facility Introduction: The World of Credit Hello and welcome to our video on the difference between an overdraft and a cash credit facility. In today's fast-paced financial landscape, credit has become an integral part of our lives. From managing day-to-day expenses to funding business ventures, the availability of timely credit can make all the difference. Two commonly used credit instruments are overdrafts and cash credit facilities. While they may seem similar at first glance, their underlying mechanisms and applications set them apart. Let's dive in! Overdraft: A Safety Net for Your Account An overdraft is essentially a credit arrangement provided by a bank, allowing an individual or business to withdraw more money from their account than the available balance. It acts as a short-term borrowing option, bridging the gap between expenses and available funds. Overdrafts are typically attached to a current account and can be either authorized or unauthorized. Authorized overdrafts are pre-approved by the bank, while unauthorized overdrafts occur when withdrawals exceed the available balance without prior consent. It's important to note that unauthorized overdrafts often attract higher interest rates and fees. Cash Credit Facility: A Line of Credit for Businesses