What happens to an account balance in overdraft situations?

What happens to an account balance in overdraft situations?

• A. It becomes zero
• B. It incurs immediate fees
• C. It can lead to the closure of the account
• D. It does not affect one's credit score

Answer: (B)

In overdraft situations, the account balance does indeed incur immediate fees. When an account holder spends more money than is available in their account, the bank typically covers the shortfall, allowing the transaction to go through. However, this service often comes with a cost, as banks charge overdraft fees that can range from relatively low to significantly high, depending on the institution's policies. This approach keeps transactions from being declined, ensuring that payments are processed, but it creates a financial burden for the account holder due to the additional fees incurred. These fees can accumulate quickly if the individual continues to operate in overdraft, making it crucial for account holders to understand their bank’s overdraft policies to manage their finances effectively. The other options do not accurately represent the impact of overdraft situations. For instance, while an account may reach zero or even a negative balance, it does not become zero simply due to overdraft, as that would not account for the fees. Additionally, an account may eventually be closed due to ongoing overdraft, but this does not occur immediately nor is it a direct result of the initial overdraft situation. Finally, while overdraft can impact financial wellbeing, it can also lead to negative repercussions such as bounced checks and could potentially affect credit

In overdraft situations, the account balance does indeed incur immediate fees. When an account holder spends more money than is available in their account, the bank typically covers the shortfall, allowing the transaction to go through. However, this service often comes with a cost, as banks charge overdraft fees that can range from relatively low to significantly high, depending on the institution's policies.

This approach keeps transactions from being declined, ensuring that payments are processed, but it creates a financial burden for the account holder due to the additional fees incurred. These fees can accumulate quickly if the individual continues to operate in overdraft, making it crucial for account holders to understand their bank’s overdraft policies to manage their finances effectively.

The other options do not accurately represent the impact of overdraft situations. For instance, while an account may reach zero or even a negative balance, it does not become zero simply due to overdraft, as that would not account for the fees. Additionally, an account may eventually be closed due to ongoing overdraft, but this does not occur immediately nor is it a direct result of the initial overdraft situation. Finally, while overdraft can impact financial wellbeing, it can also lead to negative repercussions such as bounced checks and could potentially affect credit