Are Overdraft Facilities in Bank Accounts Permissible?
The answer
If you withdraw more money than you have in your bank account, the extra money you take out after your bank balance reaches zero is called an overdraft. An overdraft will allow you to borrow money through your current account. You might request one from your bank or your account may automatically offer you an overdraft (with your agreement).
Condition: Permissible only if the overdraft is free; a fee makes it interest.
Explanation
Hence, overdrafts are loans from the bank to the customer. If the overdraft facility comes with a fee, such a facility will not be permissible as the fee is interest. If the overdraft facility is free, it is permissible to avail of such a facility.
If one has an account with an overdraft facility which charges, one should deactivate or cancel such a facility or switch to an account which does not have such a facility.
And Allah knows best.
Mufti Faraz Adam
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.