overdraft

noun over·draft \ ˈō-vər-ˌdraft \

|Updated on: 11 Jun 2018

Definition of overdraft

1 : an act of overdrawing at a bank : the state of being overdrawn; also : the sum overdrawn

2 : line of credit

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See overdraft defined for kids

Recent Examples of overdraft from the Web

But contamination because of groundwater overdraft, the researchers said, could happen almost anywhere in the Central Valley.

— kurtis alexander, San Francisco Chronicle, "Overpumping of Central Valley groundwater has side effect: too much arsenic," 5 June 2018
But that service results in the bank or credit union charging the customer an overdraft fee.

— paul gores, Milwaukee Journal Sentinel, "Lawsuit accuses Summit Credit Union of improper overdraft fees," 17 May 2018
The lender will waive overdraft fees and interest charges in April for its retail and small business customers, as well as increase the interest rate on its Classic Plus account to 5 percent from 3 percent.

— Bloomberg.com, "TSB CEO Apologizes to U.K. Lawmakers for IT System `Shambles'," 2 May 2018
In some cases, LendingClub also withdrew double payments from consumers' accounts and charged those who paid off their loans, costing consumers overdraft fees, the FTC said.

— bloomberg, latimes.com, "LendingClub deceived and double-charged borrowers, FTC says in lawsuit; stock dives 15%," 25 Apr. 2018
Low-income families must endure hefty bank overdraft fees, high check-cashing fees, exorbitant loan interest rates, and higher food costs.

— lincoln anthony blades, Teen Vogue, "Wealth Inequality 101: What to Know About Wealth Inequality in America," 12 Apr. 2018
Checking accounts for high school students often come with monthly service charges and overdraft fees.

— jenny surane, latimes.com, "Amazon's next challenge is to get teens without plastic to buy online," 30 Mar. 2018
The protest comes as some U.S. banks examine charges for basic checking accounts that run up maintenance costs but also provide a source of income through overdraft fees.

— kevin mccoy, USA TODAY, "Bank of America customers protest requirements for free checking with Change.org petition," 23 Jan. 2018
Taking financial responsibility, why to establish a checking/savings account, and debit card/overdraft protection.

— laura groch, sandiegouniontribune.com, "North County School News, March 1," 1 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'overdraft.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of overdraft

1812

in the meaning defined at sense 1

See Words from the same year

NEW! Time Traveler

Financial Definition of OVERDRAFT

overdraft

noun

What It Is

An overdraft, also called non-sufficient funds (NSF), occurs when a bank customer writes a check that is presented on an account that doesn’t exist or that has insufficient funds to cover the amount of the check.

How It Works

Let’s assume John Doe has $1,000 in his checking account today. He goes to the mall and writes a check for $1,250 at a furniture store. Because there are insufficient funds to cover the amount of the check, John is going to overdraft his account.

When the furniture retailer attempts to deposit the check, the furniture retailer’s bank (Bank ABC) will present the check to John Doe’s bank for payment. John Doe’s bank will then either pay the check (which might occur if John Doe has overdraft protection at his bank) or "bounce" the check by returning it to Bank ABC without payment. Often, banks stamp the check itself with a large "NSF" stamp (which stands for “nonsufficient funds”). Typically, Bank ABC will charge the furniture retailer a fee for presenting a bad check, and John Doe’s bank will charge John for the overdraft. The furniture store will also likely charge John Doe a fee for the overdraft.

Why It Matters

In most states, writing a bad check is at least a misdemeanor, with the consequences growing depending on the state, the amount involved and whether the transaction crosses state lines. Most overdrafts are simply oversights by consumers, so even if the police are not involved, the fees for bouncing checks can run in the hundreds or even thousands of dollars if the check writer is particularly disorganized. For this reason, it’s important to have an overdraft line or a second account from which a bank may draw when the funds in the check writer’s primary account are insufficient.

Source: Investing Answers

OVERDRAFT Defined for English Language Learners

overdraft

noun

Definition of overdraft for English Language Learners

: an amount of money that is spent by someone using a bank account that is more than the amount available in the account : an amount that is overdrawn from an account