Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Bank Debits

What it is:

Bank debits are reductions in customer accounts.

How it works (Example):

Let's say you write a check at Target for $50. Your bank, Bank XYZ, will debit your account by $50. This is a bank debit. Your bank may also debit your account for overdraft fees, annual fees or other fees.

Why it Matters:

A bank debit is a reduction in the deposits held at a bank. They can come from check payments, ATM withdrawals or other uses of funds.

It is important to note that deposits are liabilities to banks (they're assets to you, though). That's because they're obligations to customers. Accordingly, when you write a check, the bank's liabilities are reduced. In accounting, we would debt the bank's liabilities and credit the bank's cash balance (which also was reduced because it gave $50 to Target).