Overdraft
An overdraft is a type of loan that allows a person to withdraw more money from their bank account than they have available in their balance. This type of loan is typically used to cover short-term cash flow needs, such as unexpected bills or emergency expenses. When a person overdraws their account, they are charged a fee by the bank for the privilege of borrowing the money.
History of Overdrafts
The concept of overdrafts has been around since the early days of banking. In the past, banks would allow customers to overdraw their accounts up to a certain limit, and the customer would be charged a fee for the privilege. This type of loan was seen as a way for banks to make money from customers who needed short-term access to cash. Over time, the concept of overdrafts has evolved and become more regulated, with banks now offering overdraft protection plans to help customers avoid fees.
Comparison Table
| Type of Loan | Interest Rate | Fees |
|---|---|---|
| Overdraft | Varies | Varies |
| Credit Card | Varies | Varies |
| Personal Loan | Varies | Varies |
Summary
An overdraft is a type of loan that allows a person to withdraw more money from their bank account than they have available in their balance. This type of loan is typically used to cover short-term cash flow needs, such as unexpected bills or emergency expenses. When a person overdraws their account, they are charged a fee by the bank for the privilege of borrowing the money. For more information about overdrafts, you can visit websites such as Bankrate.com, NerdWallet.com, and CreditCards.com.
See Also
- Credit Card
- Personal Loan
- Line of Credit
- Cash Advance
- Debit Card
- Payday Loan
- Interest Rate
- Fees
- Cash Flow
- Banking
