CASH OVERDRAFT Meaning and
Definition
-
Cash overdraft refers to a financial situation in which an individual or a business entity withdraws more funds from a bank account than the available balance. It occurs when transactions, such as check payments or cash withdrawals, are approved by the bank despite insufficient funds in the account. This results in a negative balance, with the account holder owing the bank the excess amount that was withdrawn.
Cash overdrafts serve as a short-term borrowing option provided by financial institutions. However, they often come with high interest rates and fees, making them an expensive form of credit. Overdrafts can be authorized or unauthorized, depending on whether the account holder has a pre-approved overdraft limit or if the transaction was allowed without prior arrangement.
Cash overdrafts can be useful in managing short-term cash flow gaps or unexpected expenses. They provide flexibility for account holders to make transactions even when funds are temporarily unavailable. However, relying on overdrafts as a regular source of funds can lead to financial difficulties, as high fees and interest charges can accumulate over time.
It is essential for individuals and businesses to regularly monitor their bank account balances to prevent unintentional overdrawing and to avoid unnecessary charges. Banks also offer overdraft protection services where customers can link their accounts to other sources of funds, such as savings accounts or lines of credit, to cover overdrafts and avoid penalties.
Common Misspellings for CASH OVERDRAFT
- xash overdraft
- vash overdraft
- fash overdraft
- dash overdraft
- czsh overdraft
- cssh overdraft
- cwsh overdraft
- cqsh overdraft
- caah overdraft
- cazh overdraft
- caxh overdraft
- cadh overdraft
- caeh overdraft
- cawh overdraft
- casg overdraft
- casb overdraft
- casn overdraft
- casj overdraft
- casu overdraft
- casy overdraft
Etymology of CASH OVERDRAFT
The word "cash overdraft" is a combination of two terms: "cash" and "overdraft".
The term "cash" originates from the Middle French word "caisse", meaning "money box" or "chest". It entered the English language in the 16th century.
The term "overdraft" consists of two parts. "Over" is a prefix meaning "more, above, or beyond", derived from the Old English word "of(er)". "Draft" comes from the Old English word "dræft", meaning "drawing" or "pulling". When combined, "overdraft" refers to the act of drawing or pulling more money from an account than is available.
When these two terms are combined, "cash overdraft" refers to a situation where a bank account has a negative balance due to the account holder withdrawing more money than is available.
Infographic
Add the infographic to your website:
