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Activity Authorised or unauthorised?...you decide!

Overdrafts

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Overdrafts

Sarah has £100 in her current account. She's agreed an overdraft limit of £500 with her bank. While out shopping, she spends £300 on a new outfit.Is Sarah's overdraft authorised or unauthorised?

Authorised

Unauthorised

Overdrafts

Tom has £50 in his account and no agreed overdraft. His mobile phone bill of £75 is automatically debited from his account.Is Tom's overdraft authorised or unauthorised?

Authorised

Unauthorised

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Sorry, that's not correct.

This is not an unauthorised overdraft. An unauthorised overdraft occurs when you spend more than your account balance without prior agreement from your bank, or exceed your agreed overdraft limit.Sarah has an agreed £500 overdraft limit, which she hasn't exceeded.

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This is an authorised overdraft.Sarah has agreed with her bank that £500 can still be debited from her account when she reaches zero. Her account is now -£200, which is within her agreed £500 overdraft limit.

Yes, that's correct!

This is not an authorised overdraft. An authorised overdraft is one that has been agreed in advance with the bank. Tom has no agreed overdraft, so any spending beyond his account balance would be unauthorised.

Sorry, that's not correct!

Yes, that's correct!

This is an unauthorised overdraft. Tom has no agreed overdraft with his bank, but the automatic debit has taken his account balance below zero. His account is now at -£25 without prior agreement, making it an unauthorised overdraft.

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