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Overdraft Fee

An overdraft fee is a charge imposed by a financial institution when an account holder spends more money than is available in their account, resulting in a negative balance.

What You Need To Know

When a transaction exceeds the available funds, the bank may cover the difference to complete the transaction but will charge an overdraft fee as a penalty. This fee serves as compensation for the bank's extension of funds and is typically a fixed amount per transaction or per day that the account remains overdrawn. Overdraft fees can vary among financial institutions and may add up quickly if multiple transactions are made while the account is in a negative balance.