Which of the following statements is true concerning overdrafts?
A)An effective way to prevent them is to "overload" the account.
B)They can be avoided by arranging an automatic transfer from a savings account.
C)They are inexpensive nuisances because banks usually do not charge for overdrafts.
D)They differ from "bounced checks" in that "bouncing" a check is a mistake while an overdraft is deliberate.

Question

Quizplus · Accepted Answer

Overdrafts can be avoided by arranging an automatic transfer from a savings account, which will transfer funds to cover any overdrafts. "Overloading" the account (A) is not a valid strategy as it may result in additional fees for exceeding the account limit. Overdrafts can be costly as banks usually charge fees for each occurrence (not inexpensive nuisances), and they differ from bounced checks (D) as they both result in fees but have different causes (overdrafts occur when an account lacks necessary funds, while bounced checks result from insufficient funds in the check-writer's account).

Which of the Following Statements Is True Concerning Overdrafts