Definition of Overdraft:
A deficit in a bank account caused by drawing more money than the account holds.
An overdraft is an extension of credit from a lending institution that is granted when an account reaches zero. The overdraft allows the account holder to continue withdrawing money even when the account has no funds in it or has insufficient funds to cover the amount of the withdrawal.
Balance of a bank account in which funds withdrawn have exceeded funds deposited.
Basically, an overdraft means that the bank allows customers to borrow a set amount of money. There is interest on the loan, and there is typically a fee per overdraft. At many banks, an overdraft fee can run upwards of $35.
Loan arrangement under which a bank extends credit up to a maximum amount (called overdraft limit) against which a current (checking) account customer can write checks or make withdrawals. The most common form of business borrowing, an overdraft is a type of revolving loan where deposits (credits) are available for re-borrowing, and interest is charged only on the daily overdraft (debit) balance. It is, however, also a demand loan: the facility can be cancelled (and entire outstanding amount called) at any time by the lender at its discretion, without any warning notice or explanation. If the overdraft is secured by an asset or property, the lender has the right to foreclose on the collateral in case the account holder does not pay. Calls happen usually where the (1) borrowers credit rating falls, (2) lender has reason to believe the borrower may go into default, or (3) borrower has not revolved the overdraft in a satisfactory manner and has turned it into a hardcore debt. An overdraft is approved only for a fixed period (usually one year) after which it is must be renegotiated. In the US practice (where it is called line of credit or credit Line), the borrower is often required to maintain 10 to 20 percent of the approved overdraft limit as cash balance in the account, and must demonstrate its continuing financial health by managing without the overdraft for a one or two-month period (called cleanup period). Also called bank overdraft.
Synonyms of Overdraft
Arrear, Arrearage, Arrears, Back debts, Back payments, Bankruptcy, Bouncing check, Bust, Collapse, Crash, Default, Deferred payments, Deficit, Deficit financing, Dollar gap, Failure, Insolvency, Insufficient funds, Kited check, Overdrawn account, Receivership, Credit, Advance
How to use Overdraft in a sentence?
- When I left Cambridge I had a $900 overdraft.
- The overdraft was prepared for by the bank so they automatically assumed an acceptable level of risk was likely with the funds withdraw process.
- I did not realize that going to Pizza Hut would cause me to overdraft my bank account and make me pay a small fee.
- The overdraft allows the customer to continue paying bills even when there is insufficient money in the customer's account(s).
- You must make sure to not take to much money out of your account or you may have to pay a big overdraft fee.
- Overdraft protection is a loan provided by some banks to customers when their account reaches zero.
- An overdraft is like any other loan, the customer pays interest on the loan and, in the case of overdrafts, will typically have a one-time insufficient funds fee.
Meaning of Overdraft & Overdraft Definition