what is overdraft in banking

An overdraft occurs when a bank customer spends more money than they have in their account, but the bank pays the transaction anyway. This can happen through checks, ATM transactions, debit card purchases, automatic bill payments, and electronic or in-person withdrawals. Overdrafts can be covered through a transfer of funds from a linked account, credit card, or line of credit. Banks and credit unions have different fees associated with overdraft protection, so it's important to ask what the account terms are with respect to the cost of overdraft protection, a linked account, or a line of credit. Overdraft fees vary by bank, but they may cost around $35 per transaction. Some banks also may charge what are known as continuous overdraft fees, or daily overdraft fees. These are charges assessed every day the account remains overdrawn. Overdrafts should only be used for emergencies or as a short-term option.