Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is the term for writing checks for more money than is in one's account?

1. Cash advance

2. Overdraft

3. Insufficient funds

4. Check bounce

The correct answer is: Overdraft

The term that describes writing checks for more money than is actually in one’s account is "overdraft." When a person writes a check that exceeds their account balance, the bank may still process the transaction, but this action creates a negative balance in the account. An overdraft can lead to fees, and the account holder may be required to repay the amount they have overdrawn. In financial terms, an overdraft indicates that the account holder has exceeded their available funds. It’s important for individuals to be aware of their account balances to avoid these situations, which can lead to complications and financial penalties. The other terms mentioned have specific meanings that do not directly indicate the act of writing a check for more than the available balance. For instance, "cash advance" refers to withdrawing cash against a credit limit, while "insufficient funds" represents a bank's notification that a transaction cannot be completed due to low balance. "Check bounce" describes the situation when a check cannot be processed due to insufficient funds in the payer's account, implying that the check has "bounced back," but it typically follows the overdraft situation. Thus, recognizing the proper term is essential for understanding related banking and financial transactions.