Overdraft Fee

A charge that is assessed when a check or electronic transaction is processed for more money than is available in a checking account.

More Details

An overdraft fee is a charge that is assessed when a check or electronic transaction is processed for more money than is available in a checking account. Overdraft fees are typically assessed by banks and credit unions as a way to cover the costs associated with processing overdrafts and to discourage account holders from writing checks or making transactions when they do not have sufficient funds in their account.

Example

Imagine that you have a checking account with a balance of $100, but you write a check for $200. The bank will assess an overdraft fee to cover the cost of processing the check, even though it cannot be paid. Overdraft fees can be a significant cost, so it is important to carefully manage your checking account and to avoid overdrafts whenever possible.

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