Which statement describes an overdraft fee?

Which statement describes an overdraft fee?

• A. A monthly maintenance fee
• B. A fee charged to your account when it lacks funds but the bank allows the transaction
• C. A fee charged for late loan payment
• D. A fee to convert currency

Answer: (B)

An overdraft fee happens when you spend more money than you have in your account and the bank still approves the transaction. The bank covers the shortfall and then charges a fee for allowing that overdraft. This is different from a monthly maintenance fee, which is a regular charge for simply having the account; it’s also different from a late loan payment fee, which comes from missing a loan due date, and from a currency conversion fee, which is charged when exchanging money. Some banks offer overdraft protection, like linking a savings account or a line of credit, to avoid or reduce these fees.

An overdraft fee happens when you spend more money than you have in your account and the bank still approves the transaction. The bank covers the shortfall and then charges a fee for allowing that overdraft. This is different from a monthly maintenance fee, which is a regular charge for simply having the account; it’s also different from a late loan payment fee, which comes from missing a loan due date, and from a currency conversion fee, which is charged when exchanging money. Some banks offer overdraft protection, like linking a savings account or a line of credit, to avoid or reduce these fees.