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$5 fees coming to an ATM near you?

By Claes Bell, CFA · Bankrate.com
Thursday, March 24, 2011
Posted: 11 am ET

JPMorgan Chase is testing out a plan to boost ATM fees for noncustomers in some markets to $5 per withdrawal. From ABC News:

The new fees could be especially costly for people who withdraw cash from another bank's ATM. Chase is now charging Illinois residents $5 every time a non-customer withdraws money from a Chase ATM. That's in addition to any fees charged by the customer's bank.

$5 ATM fees for noncustomers may soon be the norm

Chase's $5 ATM fees for noncustomers may soon be the norm

"Wow. That's steep," says Gerri Detweiler, Credit.com's personal finance expert. "Even if you take out $100 at a time, that's still an expensive way to get at your own money."

Chase also is experimenting with a $4 fee for non-customers in Texas, said Christine Holevas, a spokeswoman for JPMorgan Chase. TD Bank recently stopped reimbursing its customers for fees incurred through the use of other banks' ATMs. Pittsburgh-based PNC Bank did the same for its free checking account customers, a spokesman for the bank said.

A $5 ATM fee may seem like a small issue in the scheme of things, but when you look at the numbers, they're kind of astounding. Not only are you going to get that $5 ATM fee for using a Chase ATM if you're not an accountholder, but your own bank will likely charge you a fee of around $2 for using an out-of-network ATM, so now you're out $7. If you're withdrawing $20 to pay your friend back for dinner, that amounts to a 35 percent fee to withdraw your own money.

On the other hand, I can't say this move is surprising. Chase has been pretty aggressive about exploring new fees and limits on its checking accounts lately, and they're not alone. Since the passage of Dodd-Frank, banks have been loudly warning that the law's increased regulatory burden and limits on debit-card interchange fees would force them to raise fees charged to checking account customers and ATM customers.

As banking consultant Bert Ely told me late last year when I was interviewing him for our 2010 Checking Study, "It's like squeezing a balloon. The revenue balloon is getting squeezed in places, so to get the same amount of revenue, it's got to bulge out someplace else."

On the other hand, a lot of Dodd-Frank's implementation is hardly settled, and I suspect some of this is just saber-rattling on the part of the banks, who are trying to get public opinion on their side and put political pressure on regulators to back off.

In the end, the market will decide how much banks can charge for ATM withdrawals, just as with many other types of fees. Likely, a lot of people will just pay the fee, as they have with steadily increasing ATM fees since the things were invented. As our own Greg McBride told ATM Marketplace:

"There is very little downside when a bank raises its ATM surcharge fee," said Greg McBride, senior financial analyst at Bankrate.com, which is based in North Palm Beach, Fla. "There is very little backlash from non-bank customers who pay the higher surcharge fee."

But I also think $5 is high enough to induce sticker shock and send some potential ATM customers to the corner Wallgreens or CVS to buy a pack of gum and get cash back instead. It's true that Chase has a lot of market power, and their decisions about fees have broad influence in the banking industry. But $5 might be a bridge too far for a lot of people.

What do you think? Is a $5 ATM fee reasonable? Will people just pay it, or will they avoid Chase ATMs?

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23 Comments
SparkyID7
April 17, 2011 at 6:56 pm

That is why I bank at BBVA Compass... all you have to do is keep your ATM receipt and they give you the fees back. Just like anything else today, if it isnt working for you find another bank,or get a safe!