ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An overdraft occurs when an account lacks the funds to cover a withdrawal, but the bank allows the transaction to go through anyway. 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.

Detailed explanation-2: -If you write a check and there isn’t enough in your account to cover it, it will be returned to the person or entity who tried to deposit it. This is known as bouncing a check. Bounced checks are also called rubber checks, and the technical finance term for this situation is called non-sufficient funds, or NSF.

Detailed explanation-3: -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-4: -If you write a check for more money than you have in your account without any overdraft coverage, the check will not be paid but you will still be charged an NSF fee.

Detailed explanation-5: -An overdraft allows you to spend more money than you have in your bank account-up to a limit agreed with your bank. You only pay interest on the overdraft money you use.