Customers use ATMs at a Bank of America branch in Boston. (AP Photo/Lisa Poole)
Some of the nation’s biggest banks are imposing a variety of new fees on people who withdraw money from automated-teller machines.
The move is the latest example of the burgeoning new fees that banks are imposing on customers accustomed to years of free services. Banks are scrambling to replace billions of dollars in revenue expected to be lost from new federal regulations on overdraft charges and debit cards.
J.P. Morgan Chase & Co., TD Bank Financial Group, and PNC Financial Services Group already are changing their ATM policies to collect more fees.
J.P. Morgan’s Chase retail division, for example, is going after noncustomers who withdraw money from the bank’s ATMs, according to people familiar with the matter. Chase executives have grumbled about customers of rival banks using the company’s machines even though it charges them $3, which is standard in the banking industry. Chase is now testing fees of $5 and $4 in Illinois and Texas, respectively, for noncustomer withdrawals.
More ATM fee rises are expected in the coming months. As regulations limit certain profitable practices in the industry, the banks are replacing lost funds with new fees. Some financial institutions recently introduced new charges on checking accounts as a way to make up some of the revenue that will choked from rules imposed by the Dodd-Frank financial-overhaul law.
“The reality is that bank revenue is being squeezed by regulatory changes and the banks are going to be accounting for that in other areas,” said Greg McBride, senior financial analyst at Bankrate.com.
Banks usually don’t charge customers who take money out of their own ATMs. That isn’t the case when people go outside the network operated by their own bank to get cash.
Using another bank’s machine often subjects customers to charges from their bank as well as the institution operating the ATM. Some customers can avoid ATM fees by conducting a certain amount of business with the bank.
As a result, a fee on a single ATM transaction can reach the double digits, said Mike Moebs of Moebs $ervices Inc., a Lake Bluff., Ill.-based company that tracks such data. Mr. Moebs himself said he has been hit with fees as high as $20 for using an ATM that wasn’t affiliated with his bank.
Rising ATM fees have long been a source of contention between the banking industry and consumer advocates. ATMs generated $7.1 billion in fees last year, according to consulting firm Oliver Wyman. Of that, banks collected roughly $3 billion from charging their customers for using another institution’s ATM. The operator of that ATM often levies another fee on the same customer, called a surcharge. Those surcharges averaged $2.33 in 2010, up from 89 cents in 1998, according to Bankrate.com.
Last year, federal lawmakers proposed capping ATM fees at 50 cents. The proposal never came up for a vote.
There are more than 425,000 ATMs in the U.S., according to the American Bankers Association. Roughly two-thirds of them are located outside of bank branches. Most are owned by companies other than banks, such as Cardtronics Inc. (CATM), and are located in retail stores like delis, bowling alleys and casinos. Fees on these nonbank ATMs vary greatly.
The banking industry justifies the higher fees on its machines, saying that the expense of maintaining and operating their ATM networks is rising. Banks spend $12,000 to $15,000 a year to maintain each ATM, according to the ABA.
Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said the big banks are using “scare tactics” by raising ATM fees at the same time they are fighting the new debit-card fee restrictions. He noted that small banks and credit unions don’t appear to be raising ATM fees so far.
J.P Morgan Chase, which controls nearly one dollar out of every $10 in deposits, operates roughly 16,000 ATMs. Illinois and Texas, where the bank is testing higher fees for noncustomers, represent two of the bank’s biggest retail markets, with about 3,600 ATM machines combined.
“If you have to find revenue somewhere, increasing this surcharge 1 8 on noncustomers 3 8 is the least unpleasant way of doing it,” said Tony Hayes, a partner in the banking practice of Oliver Wyman.
More bank consumers also will be facing charges from their own institutions. TD Bank last week dropped its policy of letting its customers use other ATMs for free. The bank is now charging the industry standard of $2 to most of its customers.
“The change in the ATM fee structure was necessary, in part, given the current regulatory and competitive banking environment,” said Rebecca Acevedo, a spokeswoman for the bank. TD’s research shows that most of its customers use only the bank’s ATMs, meaning they wouldn’t incur any fees, she said.
PNC recently announced that it will later this year give up its five-year-old program of reimbursing some customers for charges incurred when using a non-PNC ATM. The move came as PNC also vowed to maintain its most basic checking account free of fees.
Well, y’know, the banks are having some tough times and need all the creative revenue sources they can find to cover those executive bonuses and attract that top talent–when they find somebody who can make a hundred billion dollars worth of sound investments vanish in a single trade, they gotta pay that guy whatever he asks or he’ll head over to the self-destruction department at some other bank.
Of course, consumers will quickly figure out ways to avoid these fees–like using the debit card to make some trivial purchase at Wal*Mart or Target (you can always use a couple batteries or a six-pack of bottled water) and getting cash back on the purchase. True, the banks could try to impose fees on the retailers, but the big stores have a certain degree of clout that mere consumers lack.
$15,000 a year to maintain a single ATM? Really? Then Chase spends $240 million a year just to run ATMs in the state of Illinois? And billions of dollars nationwide annually? That seems unreasonable. If it’s true, it’s a gigantic waste of money. And that’s just for one bank.
How’s that bailout money working for the general public? Banks should have to earn your business like they used to. Communist America – Gotta love it
David – it’s not a waste of money if the bank gains customers because they want to use those machines. It creates a competitive advantage and a convenience; part of doing business. And for those who use it for the convenience without being a customer, they pay a fee to do so.
As for those fees seeming high? Not even counting the amortization of the cost of the machine itself, you have maintenance contracts, network contracts, telecomm charges, armored car and replenishment services, processing charges, cost of funds (buying large volumes of cash is NOT free), etc… Check it out on the internet; the costs seem pretty typical.
At least this explains the uproar over ATM fees; people don’t really understand just what it costs to have this convenience. Everyone just assumes it must be cheap because cash is “free”.
Sorry, I can’t get worked up here. If you want to use Chase’s ATM network and don’t want to pay fees, become a Chase customer. Duh.
And it’s not “your” money. Chase has to go to your bank to get “your” money and there are costs involved. If it’s not cost-effective to go to “your” bank to get the money, what makes you think it’s cost-effective to Chase to chase after it for you (pun intended).
If I’m reading this correctly, all the increases in existing fees and new fees are occurring when people go to an ATM not operated by their bank. How hard is it to only use the ATMs operated by your bank? Are there really people out there who are always running into these fees because they are going to the nearest ATM, even if it’s not operated by their bank?
The banks are crying poor ?
What happened to all that money they received
from the Federal Government during the bank
bailout ? They took the money and it was never
accounted for, now they are scrambling for fee
increases ? Heaven help the the guy on the bottom.
The article talks about “ATM machines”. ATM stands for automated teller machine. So the article is calling them “automated teller machine machines”, which makes no sense. Where are Mr. Murdoch’s editors over at Dow Jones?
I don’t have a problem with Chase charging more to non-Chase customers, or BofA charging more to non-customers. What I DO have a problem with is when banks propose raising fees on its own customers, even when those customers are not using that many services from the bank. Hopefully, this ATM story means that the idea of capping debit card transactions has been tossed out.
The banks never mention that all those ATM costs are offset by the huge reduction in headcount/real estate required to serve their customers. (unless those savings were reallocated to management bonuses.)
People just need to change their habits to avoid or minimize their costs. Take more money out at a time, and/or don’t wait until you’re down to zero dollars to replenish.
@ Mark H.:
Your punctuation should go before the closing quotation marks, not after. Editor, correct thyself.
Get a Chase account and a 3rd tier checking account and you can get free Chase ATM withdrawals (obviously) and also like 4 free non-Chase ATM transactions.
Seems to me that even if the direct costs of the machine (and there are a lot of tasks and personnel involved, from hardware to software to security to maintenance to daily restocking of cash and handling of deposits) total $15000 annually, the net cost should subtract the reduced need for in-bank personnel to handle those transactions. No question that even in the “olden days” of free fees, the machines were cost-effective for the banks.
Of course, it’s all part of the predominant modern banking philosophy: give free accounts and bonuses to the wealthy, and soak the lower echelon folks for the bulk of the fees. That’s why I just dumped my big bank! I’ll adapt to slightly less convenience in exchange for a better philosophy.
Sorry, I realize I duplicated bean counter’s remarks.
BTW, moveyourmoneyproject.org is a good place to visit if you’re considering moving to a smaller bank. Michael Moore and Bill Maher have endorsed it, and I imagine Julian Assange would as well.
This is one of the reasons of not using a ATM. Do not complain you do not have as much money if you are wasting it on ATM fees to get your own money. Plan what you are going to buy and don’t splurge. Just get what you need for that purchase. You might call me crazy but I only pay with cash. I don’t use credit cards either. Spend with in your means.
Or better yet, do what I did — find a bank that gives you a higher percentage on your checking and savings accounts, has lower overhead, has a cute talking baby in their commercials, and refunds all ATM fees. I don’t even think they were caught up in that whole mortgage hoohah a few years back.
Sure, if you get paper checks, you have to mail them, but I’ve never had a lost check — and now-a-days it costs more than that just to start up the car and go idle in the Drive-Thru line at the bank.
@ David:
“$15,000 a year to maintain a single ATM? Really? Then Chase spends $240 million a year just to run ATMs in the state of Illinois? And billions of dollars nationwide annually? That seems unreasonable. If it’s true, it’s a gigantic waste of money. And that’s just for one bank.”
Please re-read the article. Chase has 16,000 ATM nationwide and 3,600 in IL and TX combined. So, $240MM annual cost is for all 16k ATMs Chase has in the US. P.s. I don’t work for Chase.
(shakes cane, yells at kids to get off the lawn) Back in my day, a bank would take your money as a deposit and pay you a small amount of interest, then lend your money to others and charge them a large amount of interest. This is how they made their money. Why is that no longer the case?
In other news, ATMs are easily avoidable. I go to the grocery store every week, and each time I over-pay with plastic and get the excess back in cash. This works with some credit cards and all debit cards. Win-win, you get cash for no fee, plus you don’t have to make a separate trip to an ATM.
I don’t blame the banks for raising ATM fees. I suppose that the idiots in Congress thought that their would be no adverse consequences to all of the financial regulations that were enacted within the past year or two…what a bunch of morons!
Best move I made lately was changing to Charles Schwab Bank…100% of ATM fees are reimbursed. Holla.
The big banks follow one operation rule: predatory greed. Customers are to be robbed blind.
Raise the ATM fees for non customers to $50. I’ve never paid an ATM fee, or any type of fee in the 20 years I’ve had a bank account. If people are that dumb to pay, they have nobody to blame but themselves. Banks should also raise overdraft fees to $100. Who writes checks anymore????
Greedy banks. The CEOs need larger bonuses.
I kicked Chase to the curb years ago. Moved to Schwab and have never looked back. Great service, no gimmicks, and free ATMs anywhere in the US. In other words, they’re everything Chase isn’t. I highly recommend everyone do the same and show Jamie Dimon & Co. where they can stick their usury tactics.
140 billion in bonuses and one more of the many lies from Obama. Consumer protection.. what a joke. Need i say more?
When a business puts the interest of its stockholders first, over the interests of its customers or employees, this is what happens. The business model distorts and management starts to think it’s entitled to a certain level of corporate income, executive salaries and bonuses no matter how badly the business does its core work.
Commenter Mark H. is the guy who stands up in the movie theater, holds up his hands and shouts, “Stop the movie! Listen to me, everyone: You can’t really hear explosions in space!”
The reality is that bank revenue is being squeezed by regulatory changes and the banks are going to be accounting for that in other areas,” said Greg McBride, senior financial analyst at Bankrate.com.
Id really like to know what gregg got paid to say that. Or.. he knows nothing. I dont know which one it is. DA BOYZ as they on wall street borrow money from the gov at a zero rate. Then lend money out at a higher rate. What 3 4 % points? That my friends is a business model we all wish we could have. Its all on your dollar folks. And dont even get on POMO/ QE2.. in a nutshell the gov is handing the Primary Dealers free money. And they dont want you to know it. Gregg. You need a new job!! And once again folks. Always consider the source thats saying it. Thats the key!
The non profit I founded in January recently launched an online petition in support of Federal legislation to cap ATM fees. Check it out at CapATMFees (dot) com