Only One Direction for ATM Fees: Up

Consumers continue to pay higher fees for out-of-network ATM transactions, but have more access to free, non-interest checking accounts, says Bankrate Inc.’s annual survey of checking-account fees.

Combined surcharges levied by ATM deployers and a consumer’s own bank total $4.57, up 5 cents, or 1.1%, from a year ago, a record high. It is the 10th consecutive year that out-of-network fees have risen, Bankrate says.

The average surcharge levied by ATM deployers inched up 2 cents to $2.90 from $2.88. Meanwhile, the average out-of-network fee levied by a consumer’s own bank, a so-called foreign fee, rose to $1.67, up 1.8% from 2015.

High fees are taking a substantial bite out of consumers’ wallets for small ATM transactions. A $20 withdrawal, for example, will cost a consumer about 23% in fees, says Greg McBride, chief financial analyst for Bankrate, which has monitored checking-account pricing since 1998.

The upward pressure on out-of-network fees is fueled by two forces: First, fewer consumers are making out-of-network ATM transactions, which is prompting banks and ATM deployers to raise fees to maintain revenue on those transactions. Second, there is an industrywide belief that consumers making out-of-network transactions are insensitive to fees.

“Consumers are using cash less to make purchases, so the need to go to an ATM to get cash is declining,” says McBride. “Plus, no one is worried about alienating non-customers with high ATM surcharges.”

Bankrate gathered ATM and checking-account fees for 10 banks and thrifts in 25 of the largest markets for July 14 to Aug. 10, 2016.

The spread for out-of-network ATM fees is substantial. Consumers in Phoenix pay the highest out-of-network ATMs fees at $5.07 per transaction. By contrast, consumers in San Francisco pay $3.90 per transaction, or 23% less than in the Arizona capital.

One way consumers can avoid paying ATM fees for out-of-network transactions is to get cash back at the point-of-sale, McBride says.

While consumers are paying more for ATM transactions, the availability of no-strings-attached, non-interest checking accounts is growing. Overall, 38% percent of non-interest accounts do not carry monthly fees or balance requirements, up slightly from 37% in 2015, Bankrate says. In addition, the requirements for maintaining a free, non-interest checking account are easing. Non-interest checking accounts saw declines in the average opening balance, monthly service fee, and the balance required to avoid the fee. It is the first time since 2008 that all three categories have declined.

Both trends are considered a pendulum swing driven by market forces after years of banks shying away from offering free non-interest checking accounts or lowering the requirements for them. Banks looked to account fees to offset the cap on debit card fees imposed by the Durbin Amendment to the 2010 Dodd-Frank Act, McBride says.

“Free checking took a hit a hit in the years after Durbin was implemented, but that has run its course,” says McBride. “While more non-interest checking accounts do not carry fees and balance requirements, this is really more of a leveling out in the market.”

The Durbin Amendment took effect in 2011 and limits debit card interchange fees for all U.S. banks with $10 billion or more in assets.

According to Bankrate, consumers also saw some slight relief in checking-account overdraft fees, which declined 0.1% on average to $33.04. Consumers are charged an overdraft fee when a purchase or payment made by check or debit card is greater than the balance in the account at the time the transaction clears.

“Overdraft fees may be down, but there is not much relief,” says McBride, who adds the most common overdraft fee is $35 for the 8th consecutive year. “There are still plenty of banks increasing overdraft fees.”

—Peter Lucas