What Does Overdraft Mean?


10 Answers

Chetan Agrawal Profile
Chetan Agrawal answered
An overdraft is a financial agreement, whereby money can be withdrawn from a bank account even when the balance has hit zero. An individual will be able to withdraw money from their account to a certain level below the zero mark. Some bank accounts may allow less than a hundred, whilst other bank accounts may only allow for a person to withdraw hundreds at a time.

When a person has started withdrawing money when their bank account balance has hit zero, they are known as ‘overdrawn’. If there has already been a prior agreement with the provider of the account for an overdraft, and the amount that has been withdrawn past the zero mark is within the authorised and agreed overdraft limit, then the interest will remain at the rate which has been agreed. If however there is no real prior agreement, or the amount of money has exceeded the agreed amount, then the amount of interest that will be charged will go above the normal and agreed rate.

If the negative bank account balance goes beyond the agreed terms, as described above, then additional fees as well as interest could be charged to the individual - as well as the aforementioned higher interest rates.

Many people choose to use an overdraft instead of a normal bank loan. This is because bank loans and other agreements will usually involve some rather high interest rate. Something comparable would be a payday loan, which has interest rates that often exceed 4,000%. Naturally an overdraft agreement would not involve this level of interest and would see a person being able to spend money even when their pay cheque has not come through yet. The money can easily be paid back without absurd levels of interest. This kind of agreement is generally popular amongst University students.
Aimee Rogers Profile
Aimee Rogers answered
A bank overdraft is something that you can choose to have if your bank allows it, and basiclaly it lets you draw out more money than you have in. Usually the amount of money you can have as an overdraft in the beginning is around £500 but it depends upon the bank and how much they will let you borrow personally.

Bank overdrafts can come in extremely handy if you have bills coming out which you cannot currently afford to pay. Perhaps your payday from your job is at the end of the month yet some bills may want to come out in the middle of the month? You would not have the money and therefore you would become overdrawn and if you have not got a limit then you will be charged. In order to find out more about overdrafts visit your local bank and they will be able to explain more to you.
samual answers Profile
samual answers answered
It's a legal scam designed by the banks to steal money out of ones account. They also use the return deposit item scam to rip you off twice for the same transaction. A human never sees or touches the transaction but a mere 60 seconds to enter the deposit and its either paid or returned within milliseconds via a computer so they can't even justify the $35 nsf fee. You can't open a bank account though unless you sign the documents giving them the right to rip you off.
Anonymous Profile
Anonymous answered
What a overdraft is, is when you take more money out than you have in your account.  The bank goes ahead and spots you the extra money even if its just some change.  Then they charge you an overdraft fee.
Steven Vakula Profile
Steven Vakula answered
It is when there is a call for payment on an account that does not have sufficient fund to pay for the payment.
Anonymous Profile
Anonymous answered
Overdraft ia a situation when a bank account owner withdraws a proportion of money that is more than in the account.
Shezan Shaikh Profile
Shezan Shaikh answered
Overdraft is a banking term, it occurs when the bank account holder withdraws the amount which is more than the available balance in the account. This incident is known as Overdraft. The term is also known as Over- Drawing. This gives the account holder a negative balance and thus ultimately making the account go into credit.

However banks also provide the facility of prior arrangements for the account holders request for over draft. The bank also gives the account holder to choose the interest rate to his convenience. However if the over drafting balance exceeds more than agreed upon the band is liable to charge a fee and also increase the interest rate. Banks in the United Kingdom often provide a basic over draft facility at the time of opening an account.
According to my knowledge...

If you are na account holder in a bank for a long time, and if the bank authorities think that you are a regular customer with a clean image, then at critical times when you are in need of money, though you don't have the needed amount in your account, the bank gives you the draft for the requested amount, so that it will be deducted in the course of time from your account.

For eg. If you have a balance of only $500, and you need $1000, then bank gives you draft for $1000 and the remaining $500 shall be deducted from your account, next time when you deposit the amount.
vivek sethiya Profile
vivek sethiya answered
This facility is provided by a bank to the customer.and customer can get amounts and write cheques and make other payments even when the balance is not enough in their account to cover them. But the bank will take some charges for this facility.
Anonymous Profile
Anonymous answered
My teacher at college (he's a bit stupid.) Said that its like you borrow only a little bit of money and give it back quickly ????

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