Bank Debits
A bank debit is a bookkeeping term for the realization of the reduction of deposits held by bank customers. When the landlord deposits the check and the funds are withdrawn from your bank account, a bank debit will be marked on your account statement. A bank debit occurs when a bank customer uses the funds in their account, therefore reducing their account balance. Taken a step further, if you only had $175 in the account you will be charged an overdraft fee of $25, which will be a bank debit once you increase funds in your bank account. When a bank debit occurs and funds are withdrawn, the bank's liabilities are reduced, and the bank's liabilities are debited.
What Are Bank Debits?
A bank debit is a bookkeeping term for the realization of the reduction of deposits held by bank customers. A bank debit occurs when a bank customer uses the funds in their account, therefore reducing their account balance.
Bank debits can be the result of check payments, honored drafts, the withdrawal of funds from an account at a bank branch or via ATM, or the use of a debit card for merchant payments. Economists also study bank debit statistics to forecast national economic trends, including the demand for cash.
Understanding Bank Debits
Anytime money is moved out of a customer's account it is recorded as a bank debit. Bank debits can also include any overdraft fees, annual account fees, or other fees associated with the management and upkeep of the bank account. Bank debits are only permitted by the account holder and any fees are legally allowed when a customer legally signs the account opening documents.
On a bank's balance sheet, deposits are liabilities; they represent a source of capital and obligations to the customer and are an asset to the customer. When a bank debit occurs and funds are withdrawn, the bank's liabilities are reduced, and the bank's liabilities are debited.
When a check is paid, the bank's obligation to the customer becomes smaller, since fewer funds are supplied to the bank. The liability that deposits represent is reduced through a debit for the amount of the check.
Example of Bank Debits
If you live in an apartment and pay a monthly rent and it is now May 31 and June's rent is due tomorrow, you write out a check for your monthly rent amount to be paid to your landlord. When the landlord deposits the check and the funds are withdrawn from your bank account, a bank debit will be marked on your account statement.
Another example would be if you have no cash on hand and decide to make a trip to the ATM around the corner. You take out your debit card and use it to withdraw $200 from the ATM, a bank debit of $200 will be recorded on your bank account statement. Taken a step further, if you only had $175 in the account you will be charged an overdraft fee of $25, which will be a bank debit once you increase funds in your bank account.
Related terms:
Automated Teller Machine (ATM)
An automated teller machine is an electronic banking outlet for completing basic transactions without the aid of a branch representative or teller. read more
Bank Deposits
Bank deposits are money placed into a deposit account at a banking institution, such as savings accounts, checking accounts and money market accounts. read more
Checking Account
A checking account is a deposit account held at a financial institution that allows deposits and withdrawals. Checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. read more
Debit
A debit is an accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet. read more
Debit Card
A debit card lets consumers pay for purchases by deducting money from their checking account. Learn how debit cards work, their fees, and pros and cons. read more
Deposit in Transit
A deposit in transit is money that has been received by a company and sent to the bank, but it has yet to be processed and posted to the bank account. read more
Disbursement
Disbursement is the act of paying out or disbursing money, which can include money paid out for a loan, to run a business, or as dividend payments. read more
What Is an Economist?
An economist is an expert who studies the relationship between a society's resources and its production or output, using a number of indicators to predict future trends. read more
Non-Sufficient Funds (NSF)
An NSF fee or non-sufficient funds fee occurs when a bank account does not have enough money to cover a payment. Read about NSF fees and how to avoid them. read more
Overdraft , Examples, & Fees Explained
An overdraft occurs when there isn't enough money in an account for a transaction or withdrawal, but the bank covers the transaction anyway. read more