[Glossary](https://blnkfinance.com/glossary) Overdraft # What is an overdraft in a ledger? Overdraft An overdraft lets a source balance go negative so a transaction can still post. The debit is larger than the credit on that balance. Use it when you mean to extend credit. Turn it off when a wallet or escrow must never go below zero. ## How does an overdraft work? Without overdraft, a debit that exceeds available funds is rejected. With overdraft, the ledger applies the debit and the balance becomes negative. That negative is a real obligation. It is not a display trick. ## Overdraft vs negative balance Negative balance is the number. Overdraft is the permission that allowed it. A bug can also produce a negative if you posted the wrong side. Check the permission before you treat every negative as credit you meant to give. ## When should you allow it? Internal settlement accounts, some lending products, and certain clearing pots. Not on customer wallets unless the product is credit. Not on escrow. Inflight already reserves funds. Do not stack an accidental overdraft on top of a hold you forgot to void. In Blnk you enable overdraft on the transaction when the source is allowed to go negative. Leave it off for wallets that must stop at zero. See [overdrafts](https://docs.blnkfinance.com/transactions/overdrafts). Related terms - [Balance](https://blnkfinance.com/glossary/balance) - [Inflight](https://blnkfinance.com/glossary/inflight) - [Transaction](https://blnkfinance.com/glossary/transaction) - [Ledger](https://blnkfinance.com/glossary/ledger)