(John Rawson:- )You stated that, in your system, when granted an
overdraft, a credit was placed in your account against which you could draw. (And
I guess you pay interest on the whole amount.)
(Joe replies:-) How could it be different in any system? You’d pay
interest only on the amount of the ‘overdraft’. There has to be a positive
balance in the account for cheques to be drawn against. If a cheque came in
that would put the account into a negative balance, and the bank honoured it, it
would be making a ‘loan’ to you for the amount of the deficiency. Some bank
accounts here come with an ‘automatic overdraft protection’ feature which the
Bank no doubt charges you something for providing. This is where the bank
would cover any cheques written, probably only up to a certain limited amount,
though, where they’d otherwise be returned marked NSF.
Rare indeed now, in this country, to have any kind of bank account on which
there are no monthly charges. Even the Credit Unions seldom offer that
anymore. (Our personal savings/chequing account at our local Credit
Union allows us unlimited ‘free’ deposit, withdrawal, and chequing
privileges as long as a $ 500 minimum monthly balance is maintained. My
company’s current account at the same institution requires a $ 10,000 minimum
monthly balance. [Which, in both cases, is part of the overall minimum monthly
balance on which the CU pays us interest.]
If the accounts were to fall below those minimums, we’d be charged a fee for
each credit or debit entry. I believe it’s a $ 1.00 or $ 1.25 now. Neither
our personal nor my company’s account have an ‘automatic overdraft protection’
feature attached to them. If either were to have a negative balance from
cheques we’ve written, those cheques would bounce. Now at the local CU or the
Banks that type of personal account is no longer offered. A new
personal savings/chequing account comes with either a charge for each entry, or
a monthly ‘package’ fee that covers that, and a variety of services, including
automatic ‘overdraft protection’.
(John continues;-) Here we have an "Overdraft Authority" allowing me
to borrow up to, say, $5,000. I am charged for setting it up, and also a
periodical "line of credit" fee. But if I am only overdrawn by $2,500, my balance
is shown as "$2,500 OD", and I pay interest only on that amount. And if I went a
hundred or two over the limit (by cheque) probably they would honour it, with a
hefty "honour fee" plus perhaps a nasty letter.
(Joe replies:-) Well, this is the same as here, except as I said, some
Banks here offer an ‘automatic’ overdraft protection feature, and the ‘line of
credit’ fee anticipating that will be no doubt included in their monthly
‘package’ fees.
(John continues:-) In brief, no credit to draw on and account shown as
negative. Used to be printed in red ink, hence the term "in the red".
RE: [socialcredit]
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