what is overdraft?

Answer 1

Means, you wrote a check for more than you had in your accounts. The check bounces, you have to pay the person you gave the check to, what you owe. And... the bank hits you with an exorbitant overdraft fee. Typically $25 or more per check. Some banks will automatically not bounce the check and treat it as a loan to you, if you have set this up in advance for your account. But, watch out for a high interest rate.

Answer 2

Overdraft means that you have spent more in your checking out than you have in your checking account. Most banks offer offerdraft "protection" which means that they will pay the check rather than sending it back to the company/person that you wrote it to. If an item tries to come out of your account and the money is there, you will typically be charged a ridiculous fee of more than $25.

If your checking account is in the negative, banks normally charge a small fee (ex: $3) EVERY day that your account is negative until you bring back into the positive. This can add up VERY QUICKLY.

I recommend that you NEVER use money in your account that isn't there. It's just not worth it.

Hope this answers your question.

http://www.financialgym.org

Answer 3

Overdraft is a secured personal loan that you arranged with your bank as part of a current account's facility. You normally pledge your fixed deposit to the bank for a specific amount and in return you get the quantum of that amount as a personal loan.

For example, you pledge $3,000.00 fixed deposit and you get $3,000.00 overdraft for your current account. If your account balance is $1,000.00 when you issued a $2,500 cheque to someone, your overdraft is activated by covering the difference of $1,500.00. So, you will be charged a fee, around $20.00 or varied, and interest expense for using the overdraft.

However, your cheque will be bounced if it exceeds its overdraft arrangement. Using the same example, this happens when you issued a $4,000.00 to your friend. Then, you will be charged for another fee for returned cheque.

Of course, banks have different practices or product features for their checking or current account and you will have to see which suits you to your personal finance needs.

Answer 4

[edit] Overdrafts in the United Kingdom
Banks in the UK often offer a basic overdraft facility, subject to a pre-arranged limit (known as an authorised overdraft limit). However, whether this is offered free of interest, subject to an average monthly balance figure or at the bank's overdraft lending rate varies from bank to bank and may differ according to the account product held. It is very useful in UK

When a customer exceeds their authorised overdraft limit, they go into unauthorised overdraft. Exceeding their authorised limit often results in the customer being charged one or more fees, together with a higher rate of lending on the amount by which they have exceeded their authorised overdraft limit (the unauthorised overdraft interest rate). The fees charged by banks can vary.

A customer may also incur a fee if they present an item which their issuing bank declines for reason of insufficient funds, that is, the bank elects not to permit the customer to go into unauthorised overdraft. Again, the level and nature of such fees varies widely between banks.

In 2006 the Office of Fair Trading issued a statement which concluded that credit card issuers were levying penalty charges (penalty charges - also know as liquidated damages clauses - are void in UK contract law unless they represent a genuine pre-estimate of the cost of a breach of contract) when customers exceeded their maximum spend limit and / or made late payments to their accounts. In the statement, the OFT recommended that credit card issuers set such fees at a maximum of 12 UK pounds [1].

In the OFT's statement, the OFT indicated that it thought the fees charged by credit card issuers were analogous to unauthorised overdraft fees charged by banks. Many customers who have incurred unauthorised overdraft fees have used this statement as a springboard to sue their banks in order to recover the fees. It is currently thought that the England and Wales county courts are flooded with such claims [2]. Claimants tend frequently to be assisted by web sites such as the The Consumer Action Group. To date no bank has appeared in court to justify its unauthorised overdraft charging structure and many customers have recovered such charges in full [3]. Some banks have responded to such actions by closing customer accounts, on the basis that those accounts have not been operated within the terms and conditions [4] which the customer consented to when the account was opened

Answer 5

Overdraft is a flexible way to borrow money from Your current bank account. You don't get any charges as long as You are within Your limit accepted by bank. Otherwise charges are very high.

Answer 6

It's like an automatic loan the bank gives you if you withdraw more than is in your bank account. As soon as you go into the negative it will automatically pay the bill for you but then will start charging you interest on the amount it had to pay for you. It's a good safety net in case you miscalculate how much you have in your banking account but it'll cost you quite a lot if you don't pay it back quickly!

Answer 7

overdraft protection i think is what you mean. it means, if you write checks for more then what you have in your checking account, your savings account will cover your checks, unless you don´t have enough in your savings account.

its a rough explanation. hope it helps.

Answer 8

Not sure of your context, but in banking it is when you have $50 in your checking account but write a check for $65....

Also known as NSF or insufficient funds.

Answer 9

It means you wrote a check or made a withdrawal from your checking account for more money than you have and you need to deposit the difference ASAP.

Answer 10

It's a small, fixed amount of money your bank will allow you to overdraw into for a small fee. You have to pay it back quick-sharpish though, so it's not necessarily a good thing. Don't use it if you don't have to.