Advertisement:
You know you need life insurance, but how much and what kind? Get personalized answers from Nelsonomics creator Danny Nelson with a Life Insurance Blueprint.
Placeholder Lesson:
** This lesson is generated with AI assistance and approved by Danny Nelson. This lesson will communicate the essence of the topic for now until Danny can create a full lesson. **
An overdraft occurs when you withdraw or spend more money from your bank account than the available balance, resulting in a negative balance.
Banks may allow this as a short-term loan, covering the deficit up to a pre-approved limit, but it typically incurs fees or interest.
Overdrafts can be authorized, where the bank agrees in advance, or unauthorized, which often leads to higher penalties and potential rejection of transactions.
While convenient for emergencies, relying on overdrafts can lead to accumulating debt due to the associated costs.
Alternatives like credit cards or personal loans might offer better terms for managing cash shortfalls.