Why ATM Surcharges Defy Gravity

Bankrate Inc. is out with its latest survey of checking account fees, and once again the results show that increases in ATM surcharges are outpacing inflation, which is running at less than 2%.

ATM surcharges rose 4% to an average of $2.88 this year from $2.77 in 2014, while foreign fees increased 3.8% to $1.64 from last year’s $1.58, Bankrate found. Together, the two fees total $4.52, another new record and up 3.9% from $4.35 in 2014.

“The pace of the increase over the past 16 years—it’s a bit faster than inflation,” says Bankrate chief financial analyst Greg McBride.

Overdraft fees rose more modestly, by 1%, to an average of $33.07 from last year’s $32.74, the survey found.

New York City-based Bankrate has been monitoring checking account pricing since 1998. For the 2015 study it obtained fees and other charges for checking accounts from 10 banks and thrifts in each of 25 large metro areas from July 9 to Aug. 5.

Surcharges are the fees financial institutions charge to non-customers who use their ATMs, while foreign fees are the charges banks assess to their own customers when they use somebody else’s ATM.

Raising surcharges is often an easy call for banks because such fees don’t hit their own customers.

“One hundred percent of them [surveyed financial institutions] surcharge non-customers,” says McBride. “Nobody’s worried about alienating a non-customer.”

Surcharges have risen by about 7% annually since 1998 and have gone down only once, by 2.1% to an average of $1.37 in 2004. Foreign fees have declined four times over that same time span, the last time by 2.5% in 2013 to an average of $1.53.

Another reason for the fee increases is that comparatively few ATM transactions are generating revenues, according to McBride. Banks rarely charge their own customers for using in-network ATMs, and with mobile-banking apps and ATM locater services, it’s easier than ever for consumers to find such machines. Plus, consumers are well-versed in getting fee-free cash at the point of sale with PIN-debit card purchases.

“The cost of ATM networks is being amortized over fewer [fee-generating] transactions,” he says. Overdraft fees, in contrast, have risen mostly in step with inflation, according to McBride.

Meanwhile, only 37% of the non-interest-bearing checking accounts Bankrate surveyed are completely free, the lowest percentage since the survey began and down slightly from 38% in 2014 and 2013. Free checking peaked at 76% of non-interest accounts in 2009.

—Jim Daly