As Out-of-Network ATM Fees Climb to an All-Time High, Cash Gets More Expensive

In the age of electronic payments, cash is getting more and more expensive—even when accessed via electronic means. Nationwide, it costs consumers $4.69 to withdraw money from a so-called out-of-network ATM. That’s up 2.6% from a year ago, according to the latest data from Bankrate Inc., a New York City-based consumer-research firm.

That may not seem like a whopping increase, but that fee has now reached a record high for the 11^th consecutive year, according to Bankrate. In fact, it has climbed fully 55% over the past 10 years, Bankrate said. Over the same time period, debit cards were increasingly accepted in stores, making it less necessary for consumers to carry as much cash as they once did.

Indeed, reduced demand for cash at ATMs figures into the higher out-of-network fee, according to Greg McBride, chief financial analyst at Bankrate. “There are fewer out-of-network transactions, so the cost of maintaining the ATM network is spread over fewer transactions,” he tells Digital Transactions News.

Machines must still be depreciated and serviced, and couriers must still be dispatched to load cash. Banks find it relatively easy to pass that cost on to consumers, McBride says. “It’s low-hanging fruit,” he says. “It’s a convenience charge and consumers aren’t terribly price-sensitive.”

The out-of-network fee is made up of two components, a fee levied by the ATM owner and a separate charge from the cardholder’s bank. That first fee, known as a surcharge, is significantly higher than the second, but the charge from the cardholder’s bank is rising faster. The former is $2.97 on average, up 2.4% in the past year, according to Bankrate’s data. The latter fee is $1.72, up 3%. Both fees are all-time highs, Bankrate says.

McBride, though, predicts surcharges will soon start surging at a faster clip. “I certainly see that continuing to go higher,” he says. “No one’s worried about alienating a non-customer.” That impact could be softened, however, by networks that have adopted no-surcharge policies in recent years.

The fee from the customer’s bank, on the other hand, is less predictable. “If it increases, it will be at a slower pace and not in a straight line,” McBride predicts.

ATM fees are highest in Pittsburgh, where the average per transaction is $5.19, followed closely by New York City ($5.14), Washington, D.C. ($5.11), and Cleveland ($5.11), according to the data. The least expensive place is Dallas, at $4.07, followed closely by Milwaukee ($4.19) and San Francisco ($4.23).

In separate findings, Bankrate reported 38% of non-interest checking accounts bear no fees, down by half since 2009. However, another 61% of accounts will waive the fee if the account holder uses direct deposit. The most common monthly fee is $12.

The rate at which banks charge for checking accounts has been a closely watched number since the Durbin Amendment went into effect in 2011. The amendment, part of the Dodd-Frank Act, caps the income large banks can earn on debit card interchange, a move that led opponents of the law to argue that banks would rein in free checking accounts.

Meanwhile, just 2.5% of accounts levy a fee on debit card transactions at the point of sale. This fee ranges from 35 cents to $2, and when charged it is incurred only by PIN-debit transactions, according to Bankrate’s research.