Automatic overdraft Clause Samples

An automatic overdraft clause authorizes a bank or financial institution to cover transactions that exceed the available balance in a customer's account, effectively allowing the account to go into a negative balance up to a specified limit. This typically applies to checking accounts, where payments such as checks, debit card purchases, or automatic bill payments may be processed even if there are insufficient funds, with the bank advancing the necessary amount and often charging an overdraft fee. The core practical function of this clause is to prevent declined transactions and provide customers with short-term liquidity, while also clarifying the terms and costs associated with such coverage.