ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If your balance goes into overdraft, the funds are transferred automatically to your checking account to cover the difference. In other cases, the bank won’t return the transaction and process it, which means you’ll be charged fees until you deposit money to cover the difference.

Detailed explanation-2: -An overdraft occurs when you don’t have enough money in your account to cover a transaction and the bank pays it. Examples are overdrafts caused by check, in-person withdrawal, debit card purchase, ATM withdrawal, or other electronic means.

Detailed explanation-3: -The overdraft allows the customer to continue paying bills even when there is insufficient money. Many banks impose additional fees or penalties for overdrawn accounts. An overdraft is like any other loan: The account holder pays interest on it and will typically be charged a one-time insufficient funds fee.

Detailed explanation-4: -An overdraft won’t affect your credit score as long as you take care of the problem quickly. If you bounce a check, you have either taken an unauthorized loan from your bank or failed to pay a bill. Either way, it will turn up on your credit score as a bad debt if the amount owed (plus any penalties) is not repaid.

Detailed explanation-5: -Financial Transactions Could Be More Expensive "The alternative options established to serve the unbanked have been known to charge predatory fees or to hide their fees for banking-like services. Fees are often high to cash checks or transfer money without a bank account."