Dodging those ATM fees
By Libby Wells • Bankrate.com

ATM surcharges are rising and reaching into more pockets than ever and, according to consumer advocates, providing hefty profits for banks.

That irksome fee you pay every time you use some other bank's automated teller machine is not only going up in price, it is becoming more widespread, according to Bankrate.com's semiannual checking account survey.

But as ATM charges rain down harder than ever, there are umbrellas to keep you out of the worst of it.

Banks charging ahead
An analysis of 353 banks in America's 35 largest cities found 78.4 percent of banks charging fees to use ATMs, compared with 70 percent just a year ago. The average fee has gone from $1.33 to $1.38 in a year. But 41.4 percent of banks assess $1.50.

Based on figures from the General Accounting Office, Bankrate.com estimates that banks are collecting $1.9 billion from consumers every year.

"These charges continue to be a hotly debated issue," the study says, "with consumers and advocacy groups on one side, and banking institutions on the other."

When you think ATM card, you also could be thinking debit card.

For the first time since it began analyzing checking account costs in 1997, Bankrate.com included debit cards. Debit cards look like a credit card and are used primarily for point-of-sale transactions.

"A staggering percentage of institutions offering debit cards and ATM cards charge the same fees," the study says. Of the 310 institutions offering debit cards, 295 had the same price structure for debit and ATM cards, the survey found.

Fighting the fees
S ome California communities have drafted laws banning surcharges.

The Santa Monica City Council passed an ordinance Oct. 12 that will prohibit them effective Nov. 11, Berkeley and Los Angeles are considering similar bans and San Francisco voters are expected to abolish ATM surcharges when they vote Nov. 2 on Proposition F.

"Surcharges have caused outrage around the country," says Adam Radinsky, deputy city attorney and head of Santa Monica's consumer protection unit. "We're just the first city to do anything about it."

In addition, state banking commissioners in Iowa and Connecticut have banned surcharges.

Paying twice at the ATM
The reason the fee is so despised is because in most instances, a consumer pays twice. Wherever there is a surcharge from that other bank, there is usually a "foreign" or "off-us" fee charged by your own institution.

Bankrate.com's survey found a drop in the number of banks that don't charge the foreign fee. Only 11.3 percent of banks surveyed this year did not impose the fee, compared with 12.8 percent last year. Of banks that do, the most common amount is $1.50.

Unlike the surcharge, which you are notified of at the other guy's ATM, you get no heads-up on a foreign fee from your own bank. You just need to know your bank's policy.

Part of the off-us fee goes to reimburse the ATM owner, which means that bank is getting paid twice -- both times by the consumer.

Your bank is also getting a "double dip" because the other bank is giving it something for your business.

"The lion's share stays with your bank, but everybody gets a cut," says Radinsky.

Everybody but the consumer. You get a $20 ATM withdrawal from another bank and it costs you $3.

Profit or cost?
Banks say the surcharge helps them cover the cost of buying, installing and maintaining ATMs.

Advocates say it's all about profits, and the losers are consumers and smaller financial institutions.

Santa Monica, says Radinsky, is an example. Two banks -- Wells Fargo and Bank of America -- control 60 percent of the 100 ATMs in Santa Monica, he says. People avoid surcharges by taking their business to the big banks with larger ATM networks.

"The surcharge inherently favors larger players," says Radinsky. "People leave the small banks."

Laura Polacheck, senior analyst in the division of legislation of public policy for AARP, agrees. "The surcharge is just an incentive to switch to that other bank that has the ATM," she says.

"The theory that banks do this to discourage giving business to other banks makes no sense. ... They are gouging people for pure profit."

Ways around the charges
Besides moving to Iowa, there are a few other things you can do to avoid surcharges:

• Stick to your own bank's ATM network.
• Switch to a bank with a larger ATM network if you do most of your banking that way.
• Ask for cash back when you use your ATM card at the grocery store; there is generally no charge for this.
• To minimize ATM trips, make fewer, larger withdrawals.
• Use a teller, but be sure you won't be charged a fee for doing so.

Bankrate.com's survey found that 92 percent of banks do not charge customers to use their own teller machines, but there are other fees sometimes associated with ATM cards which consumers need to be aware of. They include:

• Point-of-sale charges -- About 80 percent of banks do not charge their customers to use their debit cards for purchases, according to Bankrate.com , but other customers should watch out for fees of $.15 to $1.50 per transaction.
• Annual fee -- Only 10 percent of institutions surveyed this year charge customers for the privilege of using their card, but that is double the number from last year. The most common fee is $12.
• Card replacement fee -- The cost to replace a lost or stolen card continues to be borne by 51.3 percent of banks studied, but that is a 2.7 percent drop from last year. The most common fee is $5.
• International fees -- The majority of banks charge customers to use their cards abroad. The survey found the most common fee to be $1.50, but there are banks charging up to $5 per foreign transaction.

-- Posted: Oct. 20, 1999