What is the definition of an overdraft in banking terms?

An overdraft in banking terms is defined as a service that enables an account holder to withdraw more funds than are currently available in their account. This financial practice allows for temporary access to additional funds, which can be particularly useful in situations where unexpected expenses arise or cash flow is tight. The ability to overdraw an account can often help account holders avoid bounced checks or declined transactions.

In most cases, the bank may charge interest on the amount overdrawn, and there are typically predetermined limits to how much an account holder can overdraw. This feature is different from other banking services, like maintenance fees or specific loan products, which do not involve accessing more funds than one has in their account.