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What are overdrafts?

In: Banking, Small Business Loans [Edit categories]

Answer:

Overdraft is a special facility provided to special and valuable customers. It is a facility wherein the customer can spend more than what is in his/her account. The customer can usually spend until a higher threshold set on his/her account.

Ex: Lets say you have Rs. 25000/- on your account and the bank has given you an overdraft facility of Rs. 10000/-

Then you can spend upto Rs. 35000/- from your account.

This extra 10000 that is available to you is called overdraft.

The bank would usually charge you a fee and interest for providing this facility.

First answer by Anandvijayakumar. Last edit by Anandvijayakumar. Contributor trust: 783 [recommend contributor ]. Question popularity: 2 [recommend question].

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