An overdraft is an extension of credit from a lending institution when an account reaches zero. It’s not uncommon to occasionally get caught short of money in your account. When that happens, it’s helpful to have a backup plan.
Overdraft services make sure funds are available when you need them. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it or not enough to cover the withdrawal.
Overdraft means that the bank allows customers to borrow a set amount of money. You can add Overdraft Coverage, Overdraft Protection or both services to your deposit accounts.
Your bank can opt to use its own funds to cover your overdraft. Another option is to link the overdraft to a credit card. If the bank uses its own funds to cover your overdraft, then it typically won't affect your credit score.
When a credit card is used for the overdraft protection, it's possible that you can increase your debt to the point where it could affect your credit score. If you don't pay your overdrafts back in a predetermined amount of time, your bank can turn your account over to a collection agency.
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