What does overdraft mean?
An overdraft is money withdrawn from a bank account beyond the amount actually available, or the facility that allows a customer to do this. It is usually associated with a negative account balance, although the precise charges and terms depend on the bank and the type of arrangement. People use the term when discussing fees, interest, account limits, and the practice of borrowing through a bank account. The word is particularly common in British and American banking language, with British usage often focusing on the facility and American usage often emphasizing the cost and consequences of overdrawing. An overdraft is different from simply making a purchase with insufficient funds: it usually refers either to a formal arrangement or to the resulting negative balance. In everyday conversation, “overdraft” can sound technical or institutional, while “overdrawn” is often the more natural way to describe an account or customer in that condition.
An overdraft is an amount withdrawn from a bank account in excess of its available balance, or a facility permitting such a withdrawal.
"The bank automatically covers an overdraft for a small fee."
The term can refer to the arrangement, the amount borrowed, or the state of having a negative balance.
To overdraft is to withdraw or spend more than the available balance of an account, creating a negative balance.
"He overdrafted his account while paying the repair bill."
The verb is much less common than the noun and is most often used in financial or business contexts.
Usually countable; the plural refers to multiple overdraft arrangements, facilities, or instances.
"The bank offers overdrafts to eligible customers."
An overdraft is the rare financial situation where a bank lets you spend money you have not yet borrowed—and often charges you for the privilege.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Where does overdraft come from?
Overdraft is a transparent English compound formed from over- and draft. Its banking sense developed from the older idea of drawing or ordering money from an account in excess of the credit actually available. It belongs to the same Germanic word family as draw, drawn, draft, and draught, although the compound specifically describes an excessive withdrawal or borrowing arrangement.
Related word forms
How overdraft is actually used
This is primarily a formal banking and financial term. In British usage, it often emphasizes the credit arrangement itself, while in American usage, discussions frequently focus on the negative balance, fees, and overdraft protection. The verb is less common in everyday speech than the noun.
Easily confused with overdraft
An overdraft is the facility, amount, or situation of withdrawing beyond available funds, whereas overdraw is the verb describing that action.
Overdraft is a banking noun referring to the facility or the excess withdrawal, while overdrawn describes an account or person whose balance has been taken below the available amount.