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Even though Israeli banks allow a personal account to be overdrawn up to a pre-arranged limit, some maintain that Jewish law forbids a person to go into overdraft (if this is not done in the context of a business). This is because the heter iska for banks is designed for money-making investments. When money is withdrawn simply to cover ongoing expenses for food, clothing, and other necessities, the interest charged by the bank on the overdrawn account is prohibited. Others offer a variety of justifications to permit overdraft when truly necessary.
Everyone agrees that one may go into short-term overdraft to meet ongoing expenses, otherwise they would have to withdraw money early from a savings plan and suffer a penalty. The overdraft interest is viewed as a business expense in order to avoid a much greater loss.
