An overdraft occurs when something is withdrawn in excess of what is in a current account. For financial systems, this can be funds in a bank account. For water resources, it can be groundwater in an aquifer. In these situations the account is said to be "overdrawn". In the economic system, if there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed terms, then additional fees may be charged and higher interest rates may apply. History in finance The first overdraft facility was set up in 1728 by the Royal Bank of Scotland. The merchant William Hogg was having problems in balancing his books and was able to come to an agreement with the newly established bank that allowed him to withdraw money from his empty account to pay his debts before he received his payments. He was thus the first recipient of cash credit from a bank in the world. Within decades, the advantages of this system, both for customers and banks, became apparent, and banks across the United Kingdom adopted this innovation. With the onset of industrialization, new businesses needed an easy form of credit to jump-start their activities, without having to take out loans on securities they did not necessarily have. The importance of this new financial innovation was recognized by the philosopher David Hume who described it in one of his essays as "one of the most ingenious ideas that has been executed in commerce". Reasons for overdrafts Overdrafts occur for a variety of reasons. These may include: Intentional loan – The account holder finds themselves short of money and knowingly makes an insufficient-funds debit. They accept the associated fees and cover the overdraft with their next deposit. Failure to maintain an accurate account register – The account holder fails to accurately account for activity on their account and overspends through negligence. ATM overdraft – Banks or ATMs may allow cash withdrawals despite insufficient availability of funds. The account holder may or may not be aware of this fact at the time of the withdrawal. If the ATM is unable to communicate with the cardholder's bank, it may automatically authorize a withdrawal based on limits preset by the authorizing network. Temporary deposit hold – A deposit made to