From the course: Build Your Financial Literacy
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Overdraft
From the course: Build Your Financial Literacy
Overdraft
- You never want to purposely overdraft your account. However, if it does happen and overdraft is there to help you out. Now, an overdraft is an extension of credit from your bank or credit union. That's granted when your account reaches $0, the overdraft allows you to continue to withdraw money and pay your bills. Even when your account does not have funds or has insufficient funds to cover the amount that you are withdrawing, that is an overdraft is a loan. It allows you to borrow a set amount of money from your financial institution. There is interest on this loan and typically an overdraft fee on top of that interest too. So why would your financial institution offer this? Simply put, by providing the service to you, your bank or credit union benefits by providing you this loan through interest and fees. As such, you should be sure to use overdraft protection in your account sparingly, or only in an emergency. For…
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