Overdraft Facility on Current Deposit Account

The correct answer is option 'A' - Overdraft Facility is available on a Current deposit account. Let's understand why this is the correct answer and explore the details of an overdraft facility on a current deposit account.

Current Deposit Account
A current deposit account is a type of bank account that is typically used by businesses, companies, and individuals who have frequent transactions. It is also known as a checking account or a transactional account. Unlike savings accounts, current deposit accounts do not usually earn interest. Instead, they provide easy access to funds and offer various banking services such as check payments, debit card transactions, and online banking facilities.

Overdraft Facility
An overdraft facility is a credit arrangement provided by banks to their customers, allowing them to withdraw more money than they have in their account. It is a short-term borrowing facility that helps individuals or businesses manage their cash flow and meet unexpected expenses or payments when their account balance is insufficient.

Availability on Current Deposit Account
The overdraft facility is commonly available on current deposit accounts due to the nature of these accounts. Current deposit accounts are designed for frequent transactions and often have higher transaction limits. They are also linked to various banking services, such as checkbooks and debit cards, which provide convenience in managing day-to-day financial activities.

Advantages of Overdraft Facility on Current Deposit Account
1. Flexibility: The overdraft facility provides flexibility by allowing the account holder to withdraw more money than the available balance. This can be useful during emergencies or unexpected expenses.
2. Cash Flow Management: It helps individuals or businesses better manage their cash flow by providing immediate access to funds when needed.
3. Avoiding Payment Bounces: With an overdraft facility, the account holder can avoid bounced checks or declined payments, ensuring smooth financial transactions.
4. Interest on Overdrawn Amount: Banks charge interest on the overdrawn amount, but it is usually lower compared to other types of loans or credit facilities.

Conclusion
In conclusion, the correct answer is option 'A' - Overdraft Facility is available on a Current deposit account. Current deposit accounts are well-suited for an overdraft facility due to their transactional nature and various banking services. The overdraft facility provides flexibility, cash flow management, and helps avoid payment bounces. However, it is important to use this facility responsibly and understand the terms and conditions set by the bank.