How Does A Bank Overdraft Work?

A bank overdraft is like a credit card.  If you spend more then you have in your checking account the overdraft kicks in up to a certain amount and covers that check.  Say you have a overdraft account of $1000. And you have no money in your checking account and you write a check for $250.00.  Your overdraft pays it but you now owe that money back to the bank plus interest.    It is like a safety net for your checking account.

It all depends on your bank.  Our bank will honor the check or debit that came thru on your account even though there may not be enough funds in your account.  Our bank will honor overdrafts up to $500.  In addition, your account is charged a fee for each overdraft which is very costly.  Our bank now charges $37 for each overdraft.