A bank overdraft is one of the financial instruments that is given to some customers through the bank with overdraft to extend the credit facility, which effects in the main balance of the reaches account zero. In the simple words, bank overdraft is a credit unsecured form that majorly use for fulfilling the short-term cash requirements. Banks provide a credit limit to the customers basis on their relationship with the bank. The bank levies charges and separate interest towards non-maintains of account. For the overdraft facility, the interest rate may vary from bank to bank.
An overdraft is a credit facility in which you can withdraw money from the current or savings account, even if the account balance is zero. An overdraft facility is an extension of the credit type limit offered by banks. The sanctioned limit is said to be ‘overdrawn’. An authorized Overdraft limit is assigned for every kind of customer reliant on their relationship with the bank. The customer can withdraw money up to the assigned limit. The interest rate offered by Overdraft is calculated on the withdrawn amount from the total sanctioned limit. It shall play a different role from lender to lender and reliant on the bank overdraft amount requirement, the account balance in your current or savings account, and your relationship with the respective Bank.