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An overdraft occurs when you spend more money than you have in your bank account, causing your account balance to go below zero.
In Depth
When you make a purchase or withdrawal that exceeds your available funds, your bank may cover the difference, but they typically charge a fee for this service. This can happen with debit card transactions, checks, or automatic bill payments. While it prevents a transaction from being declined, overdraft fees can add up quickly, making it an expensive way to borrow money.
Example
If you have $50 in your checking account and you write a check for $75, you will likely incur an overdraft and be charged a fee by your bank.