Breaking the bank: ATM fees

Banks are charging more and more for access to cash, but is convenience worth such crazy costs?

By Jessica Dickler, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- You're late, you're out of cash and you hit the nearest ATM. In your haste, you agree to pay the fee the machine charges. But at the end of the month you may be surprised by just how much your bank statement reveals in fees and surcharges - which are only getting steeper.

Most banks charge usage fees. In some cases, the fees don't apply to customers of the bank where the ATM is installed; in other cases, all users get charged. But at ever-growing rates, are these fees really a necessary cost of banking on demand or are consumers just getting ripped off?

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Consumers paid nearly $4.2 billion in ATM fees last year, according to Bankrate.com.
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ATM fees are at an all time high, costing consumers $4.2 billion in 2006, and more banks are announcing plans to raise them even higher.

Last week for example, Bank of America (Charts, Fortune 500) said it was boosting surcharges for non-customers at most of its ATMs nationwide to $3 from $2.

That could mean a big hit to the millions who do not hold accounts at the Charlotte-based bank, which also has the largest ATM network in the U.S.

BofA spokeswoman Betty Reese said the higher fee, which only applies to non-customers, is designed to improve access and convenience for its account holders using ATMs at its branches - reducing traffic to cash machines.

Other banks are also raising fees, including U.S. Bank (Charts, Fortune 500), which raised its fee at about 300 ATMs in California, and Wachovia (Charts, Fortune 500), which raised fees to $3 at 200 ATMs on the east coast.

Some consumers get hit twice - once by the ATM owner in the form of a surcharge, and then again by their own bank's charge, which appears on monthly statements.

The trend toward higher surcharges is unmistakable, according to Bankrate.com's 2006 checking account pricing survey. Since the last semiannual survey, 22 banks boosted these fees, while only six reduced them.

The average ATM surcharge is now at an all-time high of $1.64, up from $1.60 and $1.54 in the spring 2006 and fall 2005 surveys, respectively, according to Bankrate.com.

"Paying $1.50 or $2 for withdrawals at the nearest ATM can quickly add up," said Greg McBride, senior financial analyst at Bankrate.com. "With the average surcharge at $1.64 and your own bank charging you $1.25, it costs nearly $3 every time you go to another bank's ATM." For those keeping score, that's a whopping 15 percent premium on a $20 withdrawal.

"Two such withdrawals per week means you're throwing away $300 per year," McBride added.

So what's the (raw) deal?

Of course ATMs are convenient, and that's mostly thanks to their growing ubiquity, but a $3 surcharge seems outrageous when accessing your own checking account. Plus, some argue that ATMs are actually less costly for banks than withdrawals from human tellers.

In fact, several bills to ban ATM surcharges have been introduced in Congress since surcharging began in 1996, but thanks in part to the powerful bank lobby, none have proceeded beyond committee.

John Hall, a spokesman for the American Bankers Association, claims the fees are determined by the free market and many bank-owned ATMs, in fact, lose money because of the high cost of operations and because ATM services are free for the bank's customers, which are a majority of the ATM's users.

ATM machines cost $9,000 to $15,000 per machine, and $12,000 to $15,000 in annual maintenance. And banks must pay an interchange fee for each transaction through the ATM network, which is why most banks charge customers for using another bank's ATM.

So can you avoid paying up?

One way to avoid fees is to use your own bank's ATMs exclusively, but that's not always an option. You can also use your debit card to make purchases and ask for cash back, but only select merchants offer that convenience.

Online banking is a cheaper option that's gaining momentum. UmbrellaBank and EverBank.com, which are online only and have no branches, waive monthly ATM fees, and even refund ATM surcharges their customers pay.

Some traditional banks are also catching on. Customers that maintain an average balance of $2,000 a month at PNC Bank are free to use any ATM and PNC will automatically refund the surcharges.

But if you're stuck at the airport and you really just need an ATM, remember that convenience could be costing more than you think.

Are you tired of paying ATM fees? Do you think a $3 surcharge is excessive? Post your thoughts here.

Do you think you've been the victim of a raw deal? Email your stories and suggestions to rawdeal@cnnmoney.com.  Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.