Which statement best defines an overdraft fee?

Which statement best defines an overdraft fee?

• A. A fee charged when a transaction is rejected by the bank.
• B. A fee charged when a transaction exceeds the available balance in an account.
• C. A fee charged for keeping an account open without activity.
• D. A fee charged for closing an account.

Answer: (B)

Overdraft fees occur when you spend more money than is available in your account and the bank covers the shortfall, allowing the balance to go negative. The fee is charged for that overdraft or for every overdraft item, depending on the bank’s policy. This definition fits best because it describes a transaction that exceeds the available balance and triggers the bank’s fee as a result of advancing funds beyond what you have in the account. If the bank simply rejects a transaction due to insufficient funds, that would be more like a non-sufficient funds (NSF) outcome rather than an overdraft scenario, and inactivity or closing fees are unrelated to spending beyond the available balance. To avoid overdraft fees, keep a cushion in your account, set up balance alerts, or use overdraft protection linked to another account.

Overdraft fees occur when you spend more money than is available in your account and the bank covers the shortfall, allowing the balance to go negative. The fee is charged for that overdraft or for every overdraft item, depending on the bank’s policy. This definition fits best because it describes a transaction that exceeds the available balance and triggers the bank’s fee as a result of advancing funds beyond what you have in the account.

If the bank simply rejects a transaction due to insufficient funds, that would be more like a non-sufficient funds (NSF) outcome rather than an overdraft scenario, and inactivity or closing fees are unrelated to spending beyond the available balance. To avoid overdraft fees, keep a cushion in your account, set up balance alerts, or use overdraft protection linked to another account.