Overselling is a term using in cPanel to describe how your reseller account is set up. Many reseller host providers limit you by either the number of accounts/domain you can reseller or by the amount of space and bandwidth you can sell.
Overselling means that you are allowed to sell more space and bandwidth than you have purchased from us - however you just can't actually use more space and bandwith than you have purchased.
You have a reseller plan with with 1GB of space and 20GB of bandwith.
Without Overselling Enabled:
If overselling was not enabled, than you could only sell 1GB of space, such as 10 accounts that offer 100mbs of space. Now whether the customer uses 100mb of space or not, you have sold it and will not be allowed to sell anymore. So you might be paying for 1GB of space and sold your 10 accounts, but you are only using 250mbs of space total.
With Overselling Enabled:
If you have overselling enabled, you can sell 1000 accounts at 100mgs for each account (same with the bandwidth), and as long as those 1000 accounts do not exceed the total space and bandwidth you have purchased than there is nothing wrong with your account. So those 100 accounts might be using 750mbs of your 1GB (and of the 100GB you have sold) and your service will not be cancelled, suspended or closed.
Overselling is the only way to offer reseller hosting, reseller hosting without limits thats what you really want.
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