This section is from the book "Money And Investments", by Montgomery Rollins. Also available from Amazon: Money and Investments.
1 To "overdraw" one's account. A person having money in a bank "subject to check, " that is, subject to his written order called a "check," may issue such orders on the bank to pay this money out in such sums and at such times as may suit his convenience. This is called " checking out," and may continue so long as he does not draw - issue, give out - checks in total amount greater than the sum which he has on deposit. But in case he does exceed this amount, then his account is "overdrawn;" that is, he has "drawn " checks exceeding, or "over," his deposit. The amount of such overdrawn checks is called an " overdraft." Theoretically, a bank ought not to pay any " overdraft " checks, although in practice it is often done, but only when the bank has every confidence in its depositor making the sum good, and in supposition that his " overdraft " was accidental and not intended; or in case a previous arrangement had been made with the bank to allow for such " overdraft," the bank feeling secure in doing so. When an " overdraft "check is presented to a bank for payment, and the bank does not wish to pay it, nor yet refuse so to do, the depositor drawing the check is notified of the " overdraft," if possible, and the check held without action in the meantime. This is an act of courtesy on the part of the bank and gives the depositor a chance to straighten the matter out without injury to his business reputation.
" Overdrafts " are undesirable, and should be discouraged.
 
Continue to: