What Does Overdraft Mean?

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.