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Diffnce between cc n od....

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pranavpuri (Querist)
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27 October 2013 sir plz tell me diffrence between cash credit limit and over draft............? are both used for working capital?..... im not clear abt these term..... pls clerify.....

CA Pallav Singhania

CA Pallav Singhania (Expert)
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27 October 2013 An overdraft occurs when withdrawals from a bank account exceed the available balance which gives the account a negative balance - a person can be said to have gone "overdrawn".

If there is a prior agreement with the account provider for an overdraft protection plan, and the amount overdrawn is within this authorized overdraft, then interest is normally charged at the agreed rate.
If the balance exceeds the agreed terms, then fees may be charged and higher interest rate might apply.

Cash Credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount.

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