Definition
Overdraft
Spending more than your account holds, leaving a negative balance.
This term appears in The Budget Ledger's practical finance glossary.
An overdraft happens when a payment exceeds your available balance and the bank covers it anyway, pushing your account below zero. Banks typically charge a steep overdraft fee for this.
Repeated overdrafts are an expensive symptom of a budget running too close to the edge. A small buffer in checking or a linked savings account usually prevents them.