A funny thing happened on the way to the cash-less society. Instead of carrying no money, many Americans got hooked on instant money - courtesy of the nearest automatic teller machine.
But the price of ATM convenience is on the rise. Many banks charge customers about $1 if they use another bank's ATM. Now, banks are quietly tacking on another fee, so that a growing number of consumers are paying $2 or more for each transaction.
The new ATM surcharge fees have consumer groups hopping mad. And some in Congress want to outlaw the practice. The banks, they say, are gouging consumers - a charge the banks deny. The brewing storm over ATM fees is an example of how changing consumer habits have transformed America's banking industry.
Banks "are finding it more and more difficult to make a profit in the retail banking business," says Bob Barone, chairman of the Electronic Funds Transfer Association, based in Herndon, Va. "So they're restructuring."
ATMs were supposed to be a solution for hard-pressed bankers. They were open round-the-clock and able to dispense cash and accept deposits for roughly half of what it would cost for a bank teller to do the same activities. Banks eagerly promoted the technology and Americans flocked to it.
What the banks didn't count on was how popular the ATM would become. Instead of making one visit to a real teller, consumers began making two or even three stops at ATMs, taking out smaller amounts. The result: Bankers saved less money than they thought they would. Since 1983, ATM transactions have quadrupled, while the number of bank tellers has fallen by less than 10 percent.
Other changes took place: Banks began linking up in networks, so that their customers' ATM cards would work across the country and, eventually, internationally as well. They also began offering interest-bearing checking accounts, which put more money in the hands of consumers but put more pressure on bankers to charge for various other services. Many banks began to charge consumers a fee when they used an ATM owned by another bank.
Now, banks are starting to impose a second fee. Along with the $1 or so charged by the customer's bank, the ATM owner (whether it be a bank or some other company) can also slap on a surcharge. Fifteen states permit this surcharge. Last month, the two largest networks - Plus and Cirrus - changed their rules to allow the practice nationwide.
Many banks are moving to impose the fees, which average a little over $1 but can reach $2 or even $5 in tourist locations, such as cruise ships and casinos. In the last month, the number of ATMs with surcharges in the Plus system has jumped from 10,000 to 16,000 and now represents 14 percent of the system's nationwide network. In the states where the surcharge was already allowed, some 80 percent of the banks impose it.
Many consumers who know about the surcharge are angry. "I can understand a 40-cent charge for using an ATM in a grocery store or at a bank other than the one where my account is," says Hal Hawley of Issaquah, Wash. But the new fees "in my opinion, are usury, exorbitant, and entirely unwarranted."
Consumer groups agree. The ATM "switched from a cost-savings center to a revenue-generating center," complains Janice Shields of Ralph Nader's Center for Study of Responsive Law. "They've figured out: 'Wow, people will pay for this!' And now, with the surcharge, you pay twice."
Such protests are beginning to reverberate through Congress. Independent Rep. Bernard Sanders of Vermont has offered a bill that would prohibit banks from charging the second fee. According to a Republican committee aide, Sen. Alfonse D'Amato (R) of New York is working on a similar bill that would ban the surcharge. Rep. Charles Schumer (D) of New York has introduced another bill that would simply force ATM owners to disclose all the charges on a particular transaction. (Cirrus and Plus ATMs do display the surcharge and give consumers the option of cancelling the transaction, but they don't display the fees charged by the customer's own bank.)
Banks oppose the bills. "This is an issue of consumer choice," says Susan Murdy of Visa USA, the credit-card giant that owns the Plus ATM network. "Would you rather have fewer ATMs ... or would you rather have [all] those locations and have the option of paying the fee?"
It's not clear how much revenue ATMs bring in. The American Bankers Association says the average machine costs $7,200 more to install and maintain than the revenues it brings in. Ms. Shields, on the other hand, says ATMs represent a net savings for banks - about $2.2 billion, if the cost-savings from reducing the number of human tellers is counted.
Prof. David Humphrey at Florida State University in Tallahassee estimates that banks netted some $580 million in 1994, a fair rate of return for the billions of dollars invested to install ATMs. But he, too, opposes the fees. "My gut feeling is they're taking advantage of a situation that previously used to be outlawed."