Overdraft
FinanceAn extension of credit from a lending institution when an account reaches zero.
An Overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero.
Types of Overdrafts:
- Authorized Overdraft: A pre-arranged limit with the bank that allows you to spend more than you have, usually for a fee or interest.
- Unmanaged Overdraft: When you exceed your balance without prior agreement. This often results in higher fees and can negatively impact your credit score.
On a bank statement, an overdraft is usually indicated by a negative balance or a “DR” (Debit) sign next to the balance.
About Our Financial Glossary
This definition of Overdraft is part of our comprehensive financial and accounting processing glossary. Understanding banking terms is crucial for accurate bookkeeping, auditing, and automated data entry workflows. If you regularly work with PDF bank statements or financial documents, consider using SmartBankStatement's professional converter to securely extract, validate, and reconcile your transaction data into Excel or CSV format effortlessly.