[lxgr]

I also don't understand that part.

Why is it not possible for a bank to just always decline payment for checks drawn on overdrawn accounts as a matter of policy?

The other, and probably more relevant, credit aspect of checking accounts is depositing a check which might bounce (due to an overdrawn account) – but that also seems avoidable by just making checks available as late as legally allowed (i.e. on the second business day after deposit as far as I understand)?

[toast0]

> but that also seems avoidable by just making checks available as late as legally allowed (i.e. on the second business day after deposit as far as I understand)?

But checks can bounce much later than that. When the originating bank demands the money back, you'll have to ask the customer for it back if they've already taken it out.

[lxgr]

Ah, good point – I was only thinking about non-sufficient funds; I suppose a check can bounce for fraud much later than that, and as far as I know, the depositary bank is liable for at least some fraudulent checks.