In overdraft processing, if funds are insufficient to cover a payment, the bank may either honor the payment or decline it, and an overdraft fee will be charged either way. What may happen?

In overdraft processing, if funds are insufficient to cover a payment, the bank may either honor the payment or decline it, and an overdraft fee will be charged either way. What may happen?

• A. Honor the payment and charge no fees
• B. Honor the payment or decline it, and an overdraft fee will be charged either way
• C. Decline the payment with no fee
• D. Transfer funds from another account automatically

Answer: (B)

When you don’t have enough money to cover a payment, the bank can either pay it (honor) or not pay it (decline). In overdraft processing, a fee is charged in either situation, so you could end up with the payment going through and owing the amount plus a fee, or the payment being declined and still facing an overdraft-related charge. The key idea is that the fee isn’t avoided simply by the bank declining the item—the cost can apply regardless of whether the item is honored. To avoid surprises, keep close track of your balance and consider overdraft protection or spending within your means.

When you don’t have enough money to cover a payment, the bank can either pay it (honor) or not pay it (decline). In overdraft processing, a fee is charged in either situation, so you could end up with the payment going through and owing the amount plus a fee, or the payment being declined and still facing an overdraft-related charge. The key idea is that the fee isn’t avoided simply by the bank declining the item—the cost can apply regardless of whether the item is honored. To avoid surprises, keep close track of your balance and consider overdraft protection or spending within your means.