Understanding Discretionary Overdraft Privilege

Discretionary Overdraft Privilege

Discretionary Overdraft Privilege helps protect you against having your items declined or returned in the event of an inadvertent overdraft of your account by giving you a reserve for emergencies or unexpected situations. There is no fee for having this privilege on your account; you are only charged if you overdraw your account. Eligible accounts include discretionary Overdraft Privilege at account opening.

Discretionary Overdraft Privilege is not a loan, which is designed to be repaid over time. Should a check be submitted, or a transaction be made for funds exceeding what is available in the account, pursuant to the Deposit Agreement, the account holder is responsible for repaying the amount of any overdraft balance and applicable fees immediately. This means you must bring your account to a positive balance immediately should an overdraft situation occur, without notice or demand from the institution. Subsequent deposits will be applied to clear the overdrawn balance.

The Bank is required to operate in accordance with safety and soundness standards and are encouraged to ensure that our account holders have the ability to repay overdrawn balances before covering non-sufficient funds items. Therefore, we utilize an automated system based on algorithms, or a set of rules, that performs a daily evaluation of all eligible checking accounts to determine whether the account appears to have the ability to repay an overdrawn balance and, if so, how much. 

The automated system weighs numerous variables, including but not limited to:

  • Age of Account
  • Deposit Amounts 
  • Deposit Regularity
  • Previous Overdraft Activity and Repayments
  • Account Status 
  • Status of Loan Obligations  

The Bank is not obligated to cover any items presented for payment if the account does not have sufficient collected and/or available funds. The automated system sets a Discretionary Overdraft Privilege limit based on analysis of your ability to repay, but we reserve the right to pay or return individual transactions at our discretion. In general, however, we strive to pay your items if the system recommends a positive limit. The limit may change as frequently as daily, between a range of $0 and $1750 for qualifying consumer accounts and between a range of $0 and $3,500 for qualifying business accounts. 

Here is how Discretionary Overdraft Privilege works for you. Discretionary Overdraft Privilege is not a line of credit. However, if you overdraw your account, we have the discretion to pay the overdraft, subject to the limit of your Discretionary Overdraft Privilege. 

For example, suppose you do not have Discretionary Overdraft Privilege and your account balance is $50.00. If you have a debit item for $100.00, Sunflower Bank, N.A. will charge your account a fee (currently $36.00) for having an item with insufficient funds and will then return the item if adequate funds aren’t available. In most cases, the establishment where you made the transaction will require you to pay for the item and will normally charge you a fee (usually around $30.00) for writing an insufficient item. This means that you have now incurred two fees ($36.00 at Sunflower Bank, N.A. and $30.00 at the merchant) for an item that wasn’t even paid! 

However, if you had $700.00 of Discretionary Overdraft Privilege, here is how the situation typically would have worked. When the item is presented against your account, we would pay the item and charge you the $36.00 fee for an overdraft transaction. The total charge to you would have been $36.00 compared to $36.00 PLUS $30.00 in merchant fees if you had not had Discretionary Overdraft Privilege. Additionally, you avoid being added to any bad check lists on the check approval networks or with the merchant. 

When you use your Discretionary Overdraft Privilege you must remember to subtract the overdraft fee from your account balance. In the example above you would have subtracted   $100 from your account (the amount of the check) plus $36.00 (the amount of the overdraft fee). Any additional items that come in while your account has a negative balance will also be charged the Overdraft fee of $36.00 per item. It is important to record these fees. The next deposit that you make will bring your balance to the amount of the deposit minus the amount you were overdrawn (including any overdraft fees). 

ATM machine receipts, and other ways in which you can get available balance information, will show only your ledger balance without the Discretionary Overdraft Privilege limit included. However, you will be able to withdraw funds from the ATM and have transactions approved for ATM and debit card transactions, even though it will overdraw your account if you have given us prior consent. You must opt-in to payment of overdrafts on these items on your consumer account.  You will be charged the overdraft fee of $36.00 associated with these transactions. 

Understanding Uncollected Funds

If you deposit to your account and are informed that a HOLD will be placed on some of the funds deposited, those funds are NOT available for you to withdraw until the date indicated on the HOLD notice.

  • If an item is presented against held funds and you have Discretionary Overdraft Privilege on your account, you will be charged a negative funds fee of $36.00 to pay the item even though you have a positive ledger balance in your account.
  • For example: You have $100.00 in your checking account and deposit a $700.00 check on which a $500.00 hold is placed ($200.00 is available to you immediately) for 5 days. Although you have a ledger balance of $800.00, only $300.00 is “available” for checks or other debits to be paid.
  • If you have a $500.00 Discretionary Overdraft Privilege in the example above, you have available to you $800.00 to pay debit items.  However, you will be charged a $36.00 fee for any debits paid against your account in excess of the $300.00 shown above as “available”. 

Points to Remember About Discretionary Overdraft Privilege

  • If an overdraft occurs, your account will be charged an Overdraft fee of $36.00 for every item, even if multiple items are presented on the same day. This is the same fee that the Bank charges for insufficient items returned to the payee;
  • Your Discretionary Overdraft Privilege will not be included as part of your available balance at an ATM or other point of inquiry; however, items may be paid in excess of the balance provided, resulting in a fee;
  • You must opt-in to assessment approval and payment of overdrafts for ATM and everyday debit card transactions; a fee will be assessed if an overdraft occurs as a result of one of these transactions.
  • The Bank has the discretion, but is not agreeing and does not have an obligation to pay your overdrafts and we may withdraw or reduce the amount of this privilege at any time;
  • The Bank may not pay items using your Discretionary Overdraft Privilege if you do not maintain your account in good standing.

To Maintain Your Account in Good Standing

You must maintain your account in good standing, which includes at least: 

  • You are not in default on any loan or other obligation or subject to any legal or administrative order or levy;
  • You bring your account balance to a positive balance within each twenty-two (22) day period for a minimum of 1 business day.