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Show me the money
trail
By Jay
MacDonald • Bankrate.com
 When
you make an ATM withdrawal at a machine that's not from your bank,
you set in motion a three-way exchange between the ATM owner, the
ATM network and your bank, in which everyone gets a piece of your
pie.
As you wait for your cash to appear,
the attendant fees are being routed electronically through the ATM
system:
- The ATM owner gets an 'interchange' fee from
your bank, typically 50 cents, to cover processing costs, and
an ATM 'surcharge' from you, usually about $1.50, to cover the
cost of making the machine available. The interchange fee is set
by the ATM network; the ATM surcharge by the ATM owner.
- Your bank gets a 'foreign or off-us'
fee from you, commonly $1.30 to $1.50, to cover its end of the
transaction. Each bank sets its own foreign fees.
- The ATM network gets a 'switch fee' from
your bank, ranging from 2 cents to 9 cents, to cover the transmission
costs. Switch fees are set by the network.
When the transaction is complete, your bank
account has been lightened by somewhere between $2.80 and $3.00,
split roughly between your bank and the ATM owner, for the convenience
of banking outside your network.
Anti-surcharge activists argue that the banks
cover the costs of each 'off-us' transaction with the first 25 cents
of the surcharge and pocket the remaining $1.25. Reality, say the
bankers, paints a different picture.
The
price of competition
According to American Bankers Association figures, the number
of ATMs nationwide has grown from 139,134 to 227,000 since the advent
of surcharging in 1996. But along with the growth has come increased
competition, not just among banks but also from non-bank ATM deployers
who operate up to one-third of ATMs in some markets.
This competition, combined with market saturation,
has left total ATM transactions stalled at near 11 billion annually
for four years running, with monthly transactions per machine declining
sharply.
Costly
convenience
ATMs also are increasingly expensive to own, operate and maintain.
The ABA estimates that the cost of new machines can be as high as
$50,000, depending on functionality. On top of that, add $12,000
to 15,000 a year in maintenance costs to replenish the cash, service
the equipment, and pay the phone bill and rent.
Depending on location, ATMs also require security
features such as lighting and cameras. Other costs include signage
and advertising, monthly network fees and the interest income lost
on cash in the vaults.
Simply put, say the big banks, cash machines
are not cash cows.
Jay MacDonald
is a freelance writer based in Florida
To comment on this story, please e-mail the Bankrate.com
editors
-- Posted: Dec. 21, 1999
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