An overdraft occurs when there isnt enough money in an account to cover a transaction or withdrawal, but the bank allows the transaction anyway. Here are some key points to understand about overdrafts:
-
An overdraft can occur when you spend more money than you have available in your checking account, and the bank pays your transaction anyway.
-
Overdrafts can happen through various types of transactions, including checks, ATM transactions, debit card purchases, automatic bill payments, and electronic or in-person withdrawals.
-
Many banks and credit unions offer overdraft protection programs, which can cover overdrafts through a transfer of funds from a linked account, credit card, or line of credit.
-
Overdraft protection programs typically involve a fee and are generally limited to a preset maximum amount.
-
If you overdraw your account and dont have overdraft protection, the bank may charge you a fee in addition to requiring repayment of the overdraft amount.
-
Overdrafts are like any other loan: the account holder pays interest on it and will typically be charged a one-time insufficient funds fee.
-
An overdraft is different from a returned item or non-sufficient funds (NSF) item, which occurs when the bank returns an item (such as a check or other transaction presented for payment) unpaid because there is not enough money available in the account to cover it.
Its important to review your deposit account agreement and check with your bank to find out the terms and conditions of any overdraft protection programs that it may offer.
