Why are banks charging such high ATM fees?

ATM fees for out-of-network customers have reached record highs, rising for the tenth straight year, according to a new survey.

Charles Krupa/AP
In this Dec. 13, 2012 file photo, a customer stops at a Bank of America ATM office in Boston.

Average ATM fees for people reached record highs this year, as banks lean on non-customers to generate increasingly large revenues, according to an annual survey on checking accounts.

Those who withdraw money outside of their network are often hit with two distinct fees, found the survey by Bankrate.com: first, an average of $2.90 from the bank from which the money is being withdrawn, then an additional $1.67 from the person’s own bank, for using an out-of-network ATM. That comes out to an average of $4.57 for a single withdrawal – the highest rate in ten years.

The news comes at the tail end of an electoral season during which the topic briefly garnered attention from both Democratic candidates. In January, Democratic presidential contender Sen. Bernie Sanders of Vermont promised to cap out-of-network ATM fees at $2, writing on Twitter that he found it “unacceptable that Americans are paying a $4 or $5 fee each time they go to the ATM.” Hillary Clinton made a similar, though perhaps more desultory, gesture on Late Night with Stephen Colbert last year, calling the practice “usurious”.

Banks say there’s no obligation to use ATMs that are out of their bank’s network. The fees were excluded from regulation in the 2010 Dodd-Frank Act, which tried to stop the nickel-and-diming of merchants by capping charges imposed by banks for debit card purchases. 

ATM transactions cost banks virtually nothing – they choose to charge non-customers simply because it’s an easy way to generate income, as The Christian Science Monitor reported last year.

"ATM transactions, maintenance fees, and overdraft fees are low hanging fruit for banks increasing fee revenue," Bankrate.com chief financial analyst Greg McBride told the Monitor then. 

Nor is there any sign that after ten straight years of increases in such fees, banks will ease up on the practice, equity analyst Kevin Barker told Bankrate.com. “I would expect ATM fees to continue to move higher,” he said.

The fees account for a small fraction of bank earnings, according to a 2015 study by banking data firm SNL Financial. Of the 25 banks examined in that study, ATM fees made up less than 1 percent of earnings for all but six. The totals were still quite large: across the industry, banks with more than $1 billion in assets raked in some $437.7 million in a single quarter from ATM fees. Wells Fargo made $90 million, and Bank of America $87 million.

The fees tended to make up a higher percentage of revenues for smaller banks. Woodforest National Bank of the Woodlands, Texas made 5.6 percent of its revenue off ATM fees over the period studied, for example, while First National Bank Texas of Killeen, Texas brought in over 4.84 percent.

In April, Monitor guest blogger Carrie Kirby noted how easily such fees can add up, in a list of eight tips to avoid paying them:

Just a few dollars might seem insignificant at the time, but what you may not think about is that ATM fees can make up an obscenely high percentage of the money you're withdrawing. For instance, if you are taking out $50 and you pay a $2.50 fee to the bank whose machine you are using, plus a $2 fee to your own bank, you just paid an additional 9% to access your own money.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Why are banks charging such high ATM fees?
Read this article in
QR Code to Subscription page
Start your subscription today