Citibank’s ATM Restriction Spotlights Rising Withdrawal Limits

A recent effort by Citigroup Inc.'s Citibank to minimize the effects of a spate of fraud by cutting some customers' daily ATM withdrawal limits in the New York City area has cast some light on a dim corner of the payment industry. Daily withdrawal limits on ATMs are up dramatically since the 1990s, but banks more recently have been raising limits on cash back with PIN-based debit card point-of-sale transactions rather than at ATMs, according to one expert. According to a report last week in the New York Daily News, Citibank cut the daily ATM withdrawal limits of an unspecified number of customers starting in the middle of December because of “isolated fraudulent activity” around the city. The bank didn't give details about the fraud or tell by how much it reduced withdrawal thresholds. But reports in other media and on blogs talked of some customers who had withdrawals limits cut by several hundred dollars per day and at least one with a $1,000 daily limit cut to $500. More than a decade ago, withdrawal limits of $300 or so were common, but they've risen over the years. Tony Hayes, an ATM researcher with the Oliver Wyman Group in Boston, conducted research in 2006 with 55 banks and credit unions. He found that people with so-called classic, or standard, ATM/debit cards had an average daily withdrawal limit of $650. Limits ranged from $200 to $1,250. Customers with somewhat more upscale?what Hayes calls “gold”?debit cards had an average withdrawal limit of $935, with $500 on the low end and $2,000 on the high end. Another group of debit cards issued to customers with the highest-value checking accounts had an average daily limit of $1,110, again with $500 on the low end but with $3,000 on the upper end. Hayes says he plans to update that research soon. “Most banks have not changed their ATM withdrawal limits in the past couple of years, but there has been an upward trend in terms of increasing daily POS spending limits,” he tells Digital Transactions News via e-mail. Debit card issuers are raising POS cash withdrawal limits to avoid declining, or even potentially declining, authorizations in the checkout lane, according to Hayes. “It's good customer service and financial institutions get more interchange income,” he says. There's a caveat, however. “This is predicated on banks having sufficiently robust risk-management tools to control their exposure,” Hayes says. In this vein, debit card issuers, EFT networks and debit processors increasingly are adopting neural networks and other high-tech risk-control systems that first came into use by credit card issuers (Digital Transactions News, Aug. 29, 2007).