With the help of an overdraft account, a bank covers payment that a customer has made that would otherwise be rejected, or in the case of actual checks, would bounce and be returned without payment. As with other loans, the borrower pays interest on the outstanding balance of an overdraft loan.
We mostly see, how the interest on the loan is lower than the interest on credit cards, making the overdraft a better short-term option in an emergency. In different cases, there are additional fees for using overdraft protection that reduce the amount available to cover your checks, like insufficient funds fees per check or withdrawal.