Bank Overdraft

A bank overdraft occurs when you withdraw more money from your checking account than the available balance, resulting in a negative balance. Essentially, the bank lends you the extra funds, allowing transactions to go through even if you don’t have enough money in your account. This service is typically arranged in advance, either as a pre-approved limit or a temporary overdraft. While convenient, overdrafts usually incur fees and interest charges, making it important to manage your account carefully to avoid excessive costs.