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.

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