Legal Definitions - overdraft

An overdraft is when you take out more money from your bank account than you have available. This can happen if you have automatic payments set up or if you forget to keep track of your spending.

For example, if you have $100 in your account and you withdraw $120, you have an overdraft of $20. The bank may charge you a fee for this.

Some banks offer overdraft protection, which is like a line of credit. This means that if you overdraw your account, the bank will cover the amount and charge you interest on the loan.