Bernie Sanders: Why Do Banks Charge ATM Fees? Finance, Effects, Laws

 ATM usage fees are the fees that many banks and interbank networks charge for the use of their automated teller machines (ATMs). In some cases, these fees are assessed solely for non-members of the bank; in other cases, they apply to all users. Many people oppose these fees because ATMs are actually less costly for banks than withdrawals from human tellers.

Two types of consumer charges exist: the surcharge and the foreign fee. The surcharge fee may be imposed by the ATM owner (the deployer or independent sales organization) and will be charged to the consumer using the machine. The foreign fee or transaction fee is a fee charged by the card issuer (financial institution, stored value provider) to the consumer for conducting a transaction outside of their network of machines in the case of a financial institution.

Prior to 1988, there was no surcharging of cardholders by ATM owners in the U.S. In 1988 Valley Bank of Nevada began surcharging "foreign cardholders" (meaning holders of ATM cards not issued by Valley Bank) for withdrawals at Valley Bank ATMs located in/near Las Vegas casinos.[29] Eventually, various regional ATM Networks, and ultimately the national networks, Plus and Cirrus, permitted ATM surcharging.

Before 1996, foreign ATM fees averaged $1.01 USD nationally, according to a 2001 report from the US-based State Public Interest Research Group.[30]

As banks and third parties realized the profit potential, they raised the fees. ATM fees now commonly reach $3.00, and can be as high as $6.00,[31] or even higher in cash-intensive places like bars and casinos. In cases where fees are paid both to the bank (for using a "foreign" ATM) and the ATM owner (the so-called "surcharge") total withdrawal fees could potentially reach $11. Independent sales organizations ("ISO"s) are the driving force in ATM deployment in the U.S. today representing over 60% of the 396,000 ATMs nationwide. Some have expressed concerns that the U.S. market is becoming too saturated, spreading the resulting fee pool too thin, which may result in a future net decrease in the number of machines.[32] Other media reports indicate that growth in ATM usage has decreased, possibly in relation to the amount of fees imposed by banks.[33]

Only some fees charged by ATMs are advertised at the point of transaction. This is more of a cautionary statement, as ATMs are required by law to inform users of the surcharge fees that the machine will charge the user. This information may come in the push through menu or it may be on a sticker on the machine. However, the ATM card holder's own bank may charge a "foreign ATM network" fee to the card holder for using an ATM that is not owned and operated by the card holder's own bank. Since this charge is not assessed by the machine or the owner of the machine, it is usually not advertised at the time and place of the transaction. Thus, it becomes the responsibility of the card holder to be aware of the details of their own bank's fee structure, which may also vary from state to state, to determine the total cost of an ATM transaction. In addition, the "foreign ATM network" fee may be different if using an ATM outside the U.S. versus inside the U.S.

A new charge that has come into the marketplace is the "Denial Fee", where a customer is charged a fee for attempting to withdraw more money than they are either allowed through their daily withdrawal limit or by having insufficient funds in their account.[34]

While many consumers are faced with multiple fees as described above, a number of standalone and internet banks, such as USAA, Capital One and Ally, do not charge their customers for using another ATM and they also provide reimbursement, nationwide, of another ATM's fee. Thus, customers at some banks in the US can avoid ATM fees altogether. Another popular way to avoid paying ATM fees is to make a cashback purchase at a retail store: many retailers will allow a customer who is paying with a debit card to withdraw more than the total due the retailer and get back the difference in cash.



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