6th Grade Financial Literacy Practice Test

What is the penalty fee charged when your account balance drops below zero?

Deposit Balance Withdrawal Overdraft Fee

Correct Answer:

Overdraft Fee

Explanation:

When your balance goes below zero, the bank may apply an overdraft fee—the charge you pay for spending more money than you have in your account. This fee is the penalty tied to overdrawing, a service the bank provides when it covers the shortfall. A deposit is simply adding money to your account, which would raise your balance. A withdrawal is taking money out, an action that can lead to overdrawing but isn’t the fee itself. A balance is just how much money you currently have. Some accounts offer overdraft protection or can decline transactions to avoid the fee, but the overdraft fee is the specific charge for overdrawing.

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