War doesn't increase demand for ATM cash
By Pat Curry • Bankrate.com

War jitters may have caused a run on duct tape and plastic, but so far it has not convinced Americans that they need to line up at the ATM window for emergency cash.

Banking representatives interviewed by Bankrate.com reported that they're not seeing any runs on cash at ATMs since President Bush announced the start of the Iraqi war on March 18 and the heightened terrorist alert that accompanied it.

"We always monitor the ATMs," says Bank of America spokeswoman Lisa Gagnon. "We're prepared to replenish them as needed. How much cash people have on hand is a very personal decision for each customer. We generally recommend people prepare as they would for a holiday weekend. Keep in mind, though, that the more cash you carry, the more risk you have of loss or theft. The safest place for your money is in the bank."

SunTrust Banks Inc. uses a software model that reviews historical use trends and factors in special events, such as an approaching hurricane or a terrorist alert, to set the amount of money to stock its ATMs.

"I don't think we've seen any extraordinary demands for cash," says spokesman Mike McCoy. "We're watching it closely at machines near military bases."

Over time, banks have developed a "very good and fairly accurate" measure of gauging which ATM machines are heavily used and how frequently they need to be stocked, says Charlene Stern, senior vice president of strategy for Chicago-based NewGround, a banking consultancy.

They regularly put extra cash in ATMs on Fridays and the first and 15th of each month because many people get paid on those days. The third of the month is another heavy usage day because that's when Social Security checks get deposited, she says. The beginning of holiday weekends and heavy Christmas shopping days are other dates that are easy to predict heavier use.

Mark Mullinix, national cash product manager for cash services at the Federal Reserve, agrees.

"They're very good at this," he says. "We've experienced that banks and credit unions have a real grasp of demands. The difficulties can come when there are unexpected things that may arise that may cause some disruption in the supply chain. You think about times when there have been hurricanes or natural disasters and people feel they need to have more currency on hand. Those are times when the Fed, with the banking system, makes sure we keep longer hours if we need to."

Business as usual
Since the start of the war, Mullinix says, "It's business as usual across the country. We've seen no spike for demand in currency. Bankers are taking a look at their needs and haven't experienced that pull from either consumers or merchants."

Earthquake-prone California is perhaps more in tune with the need for contingency planning than anywhere else in the country, Stern notes. Many bank branches have two ATMs each hooked into different power systems so that if one goes down, the other will still be up and running.

Banks near military bases are seeing huge increases in their customers' needs for cash as they prepare to ship out.

"They're leaving families behind," Stern notes. "Our clients really rise to the occasion and work double-time to make sure these families are taken care of."

If anything, the volume of transactions has been off at the two branches of the Borel Private Bank & Trust Co., based in San Mateo, Calif. With the economy, customers have had a tendency to keep their funds more liquid than tying them up in low-paying investments, but senior vice president Barbara Evers says she hasn't seen any shift in cash transactions since the start of the war.

"With Y2K and California being earthquake country, we are aware of contingency planning," Evers says. "We know our clients very well. We have not seen any hoarding of cash. With Y2K, we saw that. This really was nothing like that."

Y2K set the stage
Interestingly, the Year 2000 computer scare is one of the reasons the system hasn't seen a drain on its cash on hand since the war, Mullinix says. People were afraid then that financial services would be affected and there was a spike in the cash that was taken out of banks. As a result, the Federal Reserve branch offices and their bank and credit union customers spent a lot of time talking to each other to resolve any anticipated problems.

"Some things we learned during the Y2K preparations were to keep very close and frequent communications with bank and credit union customers," Mullinix says. "Before, we saw it as a transactional relationship. At the office level of the Fed, you now have a better flow of communication. It's not just placing orders and making deposits, but talking about why are those happening. The lines of communication are wide open and flowing."

That kind of communication helps banks make the decision to stock up on extra cash during times of high consumer anxiety, Stern says.

"Wanting to be able to get up close and touch your money more often is just something that happens (during stressful times)," she notes.

The decision to pull out large sums of extra cash tends to be something of a generational issue, she says.

"I know Baby Boomers who put away several hundred dollars in $20 bills for emergencies," Stern says. "When their anxiety goes up, they think, 'If ATMs go down, I'll feel more comfortable with cash on hand.'"

She wouldn't be at all surprised if banks see a higher volume these days in small withdrawals of $20 to $40. It's coming from one of two motivations, she says: people glued to the television and not wanting to cook or wanting to get out of the house and treat themselves.

"High anxiety lends itself to people wanting to seek comfort out of low-level impulse purchases, which is where you get those $20 or $40 withdrawals," she says. "Isolation is really tough. You can only OD on CNN so much."