Thursday, June 23, 2011

Do you accept this fee?

Published in the Portland Phoenix; sidebar to larger banking story by another writer

How much do you spend in ATM fees? Maine consumers are paying more — by one estimate, the average per-transaction charge has risen from $1.50 in 2006 to $2.35 last year. And some ATMs charge $10 or $20, says Yellow Breen, chief strategic officer at Bangor Savings Bank, which is acutely aware of rising ATM fees because it reimburses customers for any changes they incur using non-Bangor ATMs. (The company charges its accountholders no ATM fees of its own.)
Those high prices, Breen says, are mainly for “captive audiences,” such as those at casinos or jails (see “Jail ATM Charges $10 Per Transaction,” by Rick Wormwood, November 12, 2010). But the cost of getting your hands on your money is rising.
Where does that money go? Simply put, it lines the pockets of the banks. But despite criticism from consumer advocates, banks say it’s not as much of a money-maker as you might be thinking.
The big winner in the transaction is likely your bank — the one that holds your account. Many banks charge accountholders for using what are called “foreign ATMs,” the industry term for “ATMs owned by someone other than your bank.” There’s virtually no cost to your bank when you use someone else’s ATM — maybe a few cents, if that. So banks that treat customers that way are simply taking your money.
If the ATM you’re using is owned by a bank (you’ll know; it’ll have the bank’s name plastered all around it as advertising), then the bank will charge a fee. Ostensibly this practice began either as a charge for convenience, or to discourage you from noticing that the most convenient ATM in your life belongs to another bank, so perhaps you should just shift your account there. But now it’s mostly just to keep the ATM from losing money.
Breen says “for the most part they’re not money-makers,” though they are “not super-expensive” either. The super-advanced ATMs, equipped with scanners that a photo of the checks and cash you deposit and print the image on your receipt, can cost $60,000 to $80,000, and will last five to seven years.
Add in the cost of servicing the machines and renting space (or building a larger branch to accommodate the ATM), and a bank is on the hook for $25,000 to $30,000 per year, per machine. “It’s hard to make that up two bucks at a time,” Breen quips. (His bank charges $3 to customers from other banks, but does not charge accountholders for using other banks’ machines, and reimburses customers for any fees those other banks charge.)
Without fees, would there be very many ATMs? Perhaps — Breen says customer convenience and advertising are other benefits of providing ATMs. He adds that Bangor Savings Bank has another incentive to put theirs around — to reduce demand for its reimbursement program.
If it’s not a bank that owns the ATM (the machine is at a convenience store, bar, or nightclub, for example), then the operator of the machine charges a fee, which is often split between the owner of the machine and the owner of the business it’s in. That money covers the purchase and operation of the machine, too, though usually those ATMs are far less sophisticated than bank-owned ones, and can generate a fair amount of cash for their owners, if they’re in high-traffic areas.