overdraft

noun over·draft \ ˈō-vər-ˌdraft \

|Updated on: 23 Jul 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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Recent Examples of overdraft from the Web

In addition, these financial institutions have cheaper access to capital and already own the software—currently used for overdraft protection—to make such loans quickly and at low cost.

— tim chen, Fortune, "Banks Should Lead the Way Out of the Payday Lending Trap," 6 June 2018
Plenty of consumers, of course, can sign up for alerts to their cell phones already to avoid overdraft fees or be contacted about suspicious activity.

— susan tompor, Detroit Free Press, "Could a tsunami of robocalls be heading to our cell phones?," 5 July 2018
The Finn by Chase app, however, doesn't allow customers to overdraw, which helps them avoid costly overdraft fees.

— adam shell, USA TODAY, "Chase all-mobile bank, Finn, rolled out nationwide in search of Millennials," 28 June 2018
Prosecutors have painted Uresti as someone under substantial financial distress who was regularly incurring overdraft charges before and during the time he was involved with the now-defunct company.

— patrick danner, San Antonio Express-News, "Uresti was courting investors in FourWinds as his own bank accounts were overdrawn," 31 Jan. 2018
Miami tops the list, with an average overdraft charge of $35.

— robert channick, chicagotribune.com, "Customer sues MB Financial Bank for allegedly charging thousands in 'predatory' overdraft fees," 13 Mar. 2018
The report also shows that Asian, Latinx and African Americans pay substantially higher overdraft fees and expenses to maintain checking accounts than whites.

— michael harriot, The Root, "Your Bank Is a White Supremacist," 22 June 2018
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

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