Please note this functionality, released via v7, is in BETA. Additional improvements will be deployed via next period on minor releases.
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation, the account is said to be "overdrawn". If there is a prior agreement with the account provider for an Authorized Overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed-upon terms, then additional fees may be charged and higher interest rates may apply; this is generally recognized as a Technical or Unauthorized Overdraft.
Technical Overdraft is available for all types of deposit accounts.
Mambu allows withdrawing below Authorized Overdraft limit only for card transactions (Financial Advices).
Given a client who has a current account which has Authorized Overdraft enabled and:
|Total Balance||Overdraft Limit|
|<total balance>||<od limit>|
When withdrawing <amount> via <card settlement type>
Then the result of the withdrawal operation will be <execution result> and the resulting account will have the following balances:
|Available Balance||Technical Overdraft Amount|
|<expected available balance>||<tod amount>|
See example results below:
|Total Balance||Overdraft Limit||Amount||Card Settlement Type||Execution Result||
Expected Available Balance
|Technical Overdraft Amount|
Technical Overdraft Interest Rate
For the initial phase, the Authorized Overdraft settings are applied for Technical Overdraft as well as for Current Account type of products. If no authorized overdraft interest is set (or authorized overdraft is not enabled on the current account), then no interest will be applied for technical overdraft amounts.
Mambu will allow setting up a different interest rate for Technical Overdraft in a future phase, please follow our future release updates.
Deposits (repayments) and Technical Overdraft
When the client makes a deposit, the Technical Overdraft due amounts will be repaid first, before Authorized Overdraft, Fees and so on. See below the balances order over which Mambu will apply deposits:
- Technical Overdraft Interest due
- Technical Overdraft amount due
- Fees due
- Authorized Overdraft Interest due
- Authorized Overdraft amount due
- Positive balance
Reversing a transaction that covered technical overdraft amounts is generally allowed, unless the account is thrown back into Technical Overdraft or it has hold or locked (guaranteed) balances. See below example:
Given we have an account with:
- Overdraft limit = 500
- Holds Balance = 1
- Authorized Overdraft amount due = 500
- Technical Overdraft amount due = 100
- Technical Overdraft Interest due = 50
After performing a deposit of 250, Mambu will no longer allow reversing the 250 deposit. This is because the reversal will throw the account back into Technical Overdraft and reversals are currently not allowed as transaction types which may trigger Technical Overdraft.
How is Technical Overdraft impacted, if the Authorized Overdraft limit is increased?
Mambu will redistribute the Technical Overdraft amount due if the Authorized Overdraft limit is increased.
As such, if the Authorized Overdraft limit is increased high enough, the Technical Overdraft amount due may become 0. For example, if an account with an Authorized Overdraft limit of 100, which is used up, and a Technical Overdraft amount due of 200 has its Authorized Overdraft limit raised to 400, then the Technical Overdraft amount due will become 0 and the Authorized Overdraft amount due will be 300.
Mambu allows the retrieval of information related to Technical Overdraft at the account level, just as we do for Authorized Overdraft. Retrievable information:
- Interest Rate
- Interest Accrued
- Amount Due
- Interest Due
The Technical Overdraft amount will also be stored at the transaction level, as part of the transaction details, and will also be taken into account when writing off a deposit account with overdrawn amounts.