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overdraft

A Dictionary of Business and Management | 2006 | © A Dictionary of Business and Management 2006, originally published by Oxford University Press 2006. (Hide copyright information) Copyright

overdraft A loan made to a customer with a cheque account at a bank or building society, in which the account is allowed to go into debit, usually up to a specified limit (the overdraft limit). Interest is charged on the daily debit balance. This is a less costly way of borrowing than taking a bank loan (providing the interest rates are the same) as, with an overdraft, credits are taken into account.

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