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The 2000 Fed report on retail banking fees found that fewer banks are collecting ATM surcharges, the first such decrease since 1996. The amount of the average surcharge held steady, at $1.25.
August 1, 2001
It may not get as much attention as some of the other data in the just-releasedFederal Reserve report to Congress on retail banking fees, but the number of financial institutions collecting an ATM surcharge declined 6 percent from the previous year's report.
While 81 percent of financial institutions in the Fed's 1999 report said they collected a surcharge, the number dropped to 75 percent in 2000. The 2000 study is the first since 1996 – when surcharging became widely allowed and the Fed began tracking it – to show no statistically significant increase in the number of banks charging such a fee. The average surcharge held steady at $1.25 in 2000.
Those numbers hardly fit the typical headline on most newspaper stories about the report, which also tracks fees for such bank services as checking accounts. "Fed report says banks continue raising service fees," said the Aug. 2 Atlanta Journal-Constitution. "ATM use costs rising for customers of big banks," according to the Aug. 2 edition of the Washington Times.
Michael Moebs, chairman ofMoebs $ervices Inc.,the Lake Bluff, Ill. consulting firm that produced the study for the government, called the 6 percent decrease in institutions collecting a surcharge "significant." Moebs has been surveying banks on the Fed's behalf since the late '80s.
Moebs believes that publicity surrounding the surcharge in late 1999 and early 2000 -- including two high-profile California cases in which Santa Monica and San Francisco banned convenience fees, then had their bans overturned by the court – may have contributed to the drop.
"There was quite a backlash," he said. "I think some banks dropped the surcharge, and others who weren't already surcharging but were considering it may have backed off."
"These results show the marketplace at work," said John Hall, communications director for theAmerican Bankers Association, noting that the average convenience fee held steady at $1.25. "Our position is neither pro nor anti-fee. We think the consumer should decide if they'll pay and what they'll pay, and I think that's what you're seeing here."
What the Fed study doesn't show, Hall said, is the percentage of bank customers that actually pay fees.
Referring to a study the ABA conducted in March of 2001 that indicated that 57 percent of consumers typically don't pay ATM fees, Hall said, "For most fees charged, there are many ways to avoid them. Consumers can avoid ATM fees by using ATMs owned by their bank, or by using another method like a debit card to get cash."
Hall thinks that some financial institutions may see dropping surcharges as a marketing opportunity. "If you're not going to surcharge, you can really play that up in advertising campaigns," he said.
Not to mention the free publicity that a surcharge-free stance can generate. Washington Mutual earned national press coverage when it eliminated surcharges at nearly 1,000 ATMs in California in October.
Ed Mierzwinski, director of thePublic Interest Research Group, which produces its own annual study of bank fees, said that his group's latest study – which is based on data from 2001 rather than the 2000 data in the Fed's study – shows that 94 percent of financial institutions charge ATM convenience fees.
"To the extent the Fed saw a decline, the Fed uses a different methodology," Mierzwinski said. "I am only aware of one big bank (Washington Mutual) that has stopped surcharging."
Mierzwinski and Moebs agree that smaller financial institutions such as community banks typically offer a better deal for the consumer. The Fed study found that 75 percent of single-state banks collect a surcharge, while 87 percent of multi-state banks do so. The PIRG study found that 97 percent of big banks (defined as 300 largest in terms of deposits) levied a convenience fee, while only 50 percent of credit unions did so.
