Automated teller machine fees up 20 percent in 5 years
With income from lending and investing flat, banks are pulling more money out of ATMs these days.
Automated teller machine fees increased 20 percent in the past five years, said a Government Accountability Office report last month. They rose from an average $1.75 per transaction in 2007 to $2.10 last year.
“Besides overdraft fees for bouncing a check, ATM fees are the biggest fees people pay to banks,” said Linda Sherry, director of national priorities for Consumer Action, a consumer advocacy group based in San Francisco.
An overdraft costs a consumer about $35 to have a bank cover a bounced debit card, or ATM, transaction. But new laws keep banks from providing customers with overdraft coverage unless they request it.
U.S. bank revenue from overdraft fees rose to $32 billion last year from $31.6 billion in 2011, said Moebs $ervices Inc.
Profit pressures are causing “a whole host of fee increases, and I think you'll see more banks start to do that,” said Huntington Bancshares CEO Stephen Steinour.
Columbus-based Huntington, with 97 ATMs in the Pittsburgh area, raised its ATM surcharge to $3 from $2 outside Ohio in February.
The increase will “offset some of the revenue loss” from a surcharge-free test Huntington began in Ohio to draw customers, Steinour said.
Consumers are not charged for using their own bank's ATMs. But fees kick in when they use another bank's network. Consumers typically face two types fees in this case: one that is charged by the bank that owns the ATM and another by their own bank.
The fee the biggest banks in the Pittsburgh-area charge their own customers for using another bank's ATM range from $2 to $3. But the penalty is steeper for non-customers using a bank's ATM — $3 to $3.50. Both types rose by as much as $1 in the past three years.
“If you use an ATM not owned by your bank and your bank is at the high end of foreign ATM fees, and that machine (owner) is at the high end of surcharges, you're paying about $5 to use that ATM,” said Ed Mierzwinski, consumer program director of U.S. Public Interest Research Group in Washington.
ATM fees generally represent less than 2 percent of banks' overall revenue, according to an analysis by SNL Financial, but still amount to tens of millions of dollars.
PNC Financial Services Group, for example, recorded over $190 million in ATM fees last year. U.S. Bancorp pulled in $346 million. Citizens Bank owner, RBS Citizens Financial Group, received $86 million.
The ATMs themselves cost banks more these days because they perform more functions, such as accepting cash deposits and dispensing receipts with images of checks deposited. Such machines cost up to $50,000 (versus as low as $9,000 for a simple cash dispenser), plus $9,000 to $15,000 a year to service and maintain, according to the American Bankers Association.
Three hundred of PNC's 673 ATMs in the Pittsburgh region are advanced-function machines. Huntington replaced its conventional ATMS with advanced ones in the Cleveland and Columbus markets and will change out the 97 machines around Pittsburgh in 2014.
What the market bears
Industry experts say three things challenge banks' bottom lines these days:
• Low interest rates that cut into loan and investment income;
• Sluggish demand for loans by consumers and businesses reluctant to run up debt in the tough economy;
• Limits placed on fees by Dodd-Frank and other legislation following the 2008 financial crisis.
Dodd-Frank regulations that took effect in 2010 cost the nation's eight biggest banks, including PNC, $19.5 billion to $22 billion a year, according to estimates by Standard & Poor's.
The law in late 2010 capped at 21 cents the interchange fee banks can charge merchants for processing a debit card transaction. Before then, banks charged an average 43 cents on each of the tens of billions of debit card transactions in the United States each year.
In addition, the CARD Act of 2009 prohibits card issuers from raising a cardholder's interest rate for one year, an effort to end misleading “teaser rates.” S&P estimated the law cost the biggest eight banks $8.7 billion in 2010.
There are no federal caps on ATM fees, enabling banks to charge what they think the market will bear.
“Banks charge high fees because they can and because not enough consumers have demonstrated that charging higher fees changes their behavior,” said consumer advocate Mierzwinski.
Yet 59 percent of 1,000 consumers polled by the bankers association last year said they managed to avoid bank fees by using their banks' machines.
Sherry, of Consumer Action, suggests consumers plan their cash needs for a week, pull extra cash from their banks' ATMs, use the card to pay for purchases, and get cash back from some of those purchases.
Thomas Olson is a Trib Total Media staff writer. Reach him at 412-320-7854 or at firstname.lastname@example.org.
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