An overdraft occurs when an account lacks the funds to cover a withdrawal, but the bank allows the transaction to go through anyway. The overdraft allows the customer to continue paying bills even when there is insufficient money.

How do you explain overdraft fees?

An overdraft fee is charged when a payment or withdrawal from your bank account exceeds the available balance and your bank covers the transaction as part of an overdraft protection service. But in addition to covering the transaction, the bank or credit union then applies the fee.

What is overdraft with example?

The definition of an overdraft is taking out more money than is in your account, or a draft of air that moves over a fire. An example of an overdraft is to write a check for $40 when you only have $20 in your account. An example of an overdraft is the air that passes over the fuel in a furnace.