In banking, OD stands for Overdraft.
An overdraft is a facility that allows individuals or businesses to withdraw more money from their account than the available balance. The bank essentially provides a short-term loan to cover the overdrawn amount. This is distinct from simply having insufficient funds; an overdraft is a permitted withdrawal exceeding the balance, while an insufficient funds situation results in a rejected transaction unless an overdraft facility is in place.
Several sources confirm this definition:
- Byju's: Clearly states that OD stands for Overdraft facility, allowing withdrawals exceeding the account balance. https://byjus.com/question-answer/what-is-cc-and-od-in-banking/
- Investopedia: While not explicitly stating the full form, Investopedia's definition of an overdraft aligns perfectly with this understanding. An overdraft happens when a transaction is allowed despite insufficient funds. https://www.investopedia.com/terms/o/overdraft.asp
- Multiple Bank Websites and Articles: Numerous sources, including Bank of America (https://newsroom.bankofamerica.com/content/newsroom/press-releases/2022/01/bank-of-america-announces-sweeping-changes-to-overdraft-services.html), Prosperity Bank (https://www.prosperitybankusa.com/Overdraft-Protection), and articles from the FDIC (https://www.fdic.gov/consumer-resource-center/2021-12/overdraft-and-account-fees) and the OCC (https://www.occ.gov/news-issuances/bulletins/2023/bulletin-2023-12.html), discuss overdraft services, fees, and protections, implicitly confirming the meaning of OD.
It's important to note that overdrafts typically incur fees. The terms and conditions, including fees and limits, vary depending on the specific bank and the individual's account.
