What charge is applied by financial institutions when an account holder spends more than their account balance?

When an account holder spends more than their account balance, the financial institution typically applies an overdraft fee. This fee is charged because the account goes into a negative balance, and the institution essentially covers the transaction that exceeds the available funds. Overdraft fees serve as a way for banks to mitigate the risks associated with overdrawing accounts and to manage the additional costs involved in processing these transactions.

The other types of fees mentioned, such as service fees or maintenance fees, are generally not related directly to the act of spending beyond the account balance. Service fees might be charged for specific account services, while maintenance fees could be applied for maintaining an account regardless of the balance, and transaction fees usually pertain to specific types of transactions rather than overdrawing. Therefore, the overdraft fee specifically addresses the scenario of exceeding an account balance.