What is an overdraft?

powderskier | 01:19 Mon 02nd Jan 2006 | Business & Finance

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Ok I know an overdraft means is a kind of loan offered by a bank. But how, exactly, does it work. If you have the option of a �500 overdraft on your current account, what does that enable you to do. Does it mean that when you have �0 balance in the bank, you can go to a cash machine and withdraw �500 in cash from that machine? Does it mean that you can pay for something by debit card when you have �0 balance and it will still go through. Does your bank balance show negative �364 if you use �364 of that overdraft?

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What is an overdraft?

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