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Overdraft
A situation in which an account holder writes a check or makes an electronic transaction for more money than is available in their account.
More Details
An overdraft is a situation in which an account holder writes a check or makes an electronic transaction for more money than is available in their account. This can occur when an account holder does not have sufficient funds in their account to cover the amount of the check or transaction, or when an account holder exceeds the available balance on their account.
Example
Imagine that you have a checking account with a balance of $100, but you write a check for $200. This would result in an overdraft, as you do not have enough money in your account to cover the check. Overdrafts can be costly, as they may result in overdraft fees and other charges being assessed by the bank or credit union. It is important to carefully manage your checking account and to avoid overdrafts whenever possible.
Related Terms
ATM
An Automated Teller Machine (ATM) is a machine that allows bank or credit union customers to make deposits, withdrawals, and other transactions.
Overdraft Fee
A charge that is assessed when a check or electronic transaction is processed for more money than is available in a checking account.
Bond
A debt security where an investor loans money to a borrower for interest and the return of the principal. They are low-risk but offer lower returns.