An overdraft is an
extension of credit from a lending institution when an account reaches
zero. An overdraft allows the individual to continue withdrawing money even
when the account has no funds in it or insufficient money to cover the amount
of the withdrawal. Basically, overdraft means that the bank allows customers to
borrow a set amount of money.
Thus, an overdraft occurs
when money is withdrawn from a bank account and the available balance
goes below zero. In this situation
the account is said to be "overdrawn".