How is "overdraft" defined in banking terminology?

"Overdraft" in banking terminology refers specifically to a situation where withdrawals from an account exceed the available balance. This means that the account holder has taken out more money than what is currently in their account, leading to a negative balance. Banks typically allow this to occur to a certain extent, but there may be fees associated with overdrawing an account, or it might lead to a requirement for the account holder to pay back the overdrawn amount promptly.

In contrast, the other options do not accurately capture the definition of overdraft. Having more deposits than withdrawals reflects a healthy account balance, while the process of creating a budget has no relation to the overdraft concept. Moreover, late payment fees are another banking aspect but are not indicative of an overdraft situation. Understanding this distinction is crucial for managing personal finances effectively.