Overdraft
A facility allowing one to withdraw beyond the available account balance.
Detailed Description
Overdraft
What is an overdraft?
An overdraft occurs when an account holder withdraws more money than is available in their bank account, resulting in a negative balance.
What are the two types of overdrafts?
The two types of overdrafts are authorized (agreed) overdrafts and unauthorized (unagreed) overdrafts.
What fees are associated with overdrafts?
Overdrafts typically incur fees such as one-time charges for each overdraft transaction and daily fees for maintaining a negative balance.
How can overdraft protection help account holders?
Overdraft protection helps prevent overdrafts by linking an account to a savings account or credit source, allowing automatic transfers to cover transactions.
Can using an overdraft affect my credit score?
Yes, while authorized overdrafts may not directly impact credit scores, frequent use can indicate financial distress, potentially lowering creditworthiness.