What arrangement allows account holders to withdraw more than their available balance without penalties?

Overdraft coverage is a service offered by banks that allows account holders to withdraw more money than they have in their checking or savings accounts up to a certain limit. This can be particularly useful in emergency situations where funds are needed immediately, but the account balance is insufficient. By utilizing overdraft coverage, customers can avoid bounced checks or declined transactions, which would typically occur if they attempted to spend more than the available balance.

This service usually comes with specific terms and conditions, such as fees or interest charges, depending on the bank's policy. However, the primary advantage of having overdraft coverage is that it provides a safety net for the account holder, ensuring that their payments and transactions can proceed as planned, despite a temporary shortfall in available funds.

In contrast, other options like a credit limit or loan provision involve borrowing funds but typically do not apply directly to an existing account balance. An excess withdrawal agreement, while similar in concept, is not a standard term widely recognized in banking practices pertaining to account withdrawals.