overdraft

noun

over·draft | \ ˈō-vər-ˌdraft

Definition of overdraft

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

2 : line of credit

Examples of overdraft in a Sentence

Recent Examples on the Web

Financial institutions tend to require minimum balances, charge monthly fees, or impose penalties for overdrafts. — Nadra Nittle, Vox, "Why cashless retailers put low-income people at even more of a disadvantage," 30 Nov. 2018 The largest 10 banks collected $11.45 billion in overdraft fees in 2017, according to the FDIC. — Yuka Hayashi, WSJ, "Bank Accounts Designed for Low-Income Customers Find Broader Audience," 3 Jan. 2019 Proposals include cutting taxes that retirees pay on pensions; increasing the minimum wage; boosting social-welfare payments; and persuading banks to stop charging overdraft fees that add up to billions, Mr. Vignal said. — Stacy Meichtry, WSJ, "Protests Threaten Macron’s Campaign to Remake France," 9 Dec. 2018 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

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.

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26 Apr 2019

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The first known use of overdraft was in 1812

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More Definitions for overdraft

overdraft

noun

Financial Definition of overdraft

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

noun

English Language Learners Definition of overdraft

: 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

See the full definition for overdraft in the English Language Learners Dictionary

overdraft

noun

over·draft | \ ˈō-vər-ˌdraft