Why Are ATM Fees So High? US Surcharges Could Be Eliminated

Automated teller machine (ATM) fees have been on the rise for nearly two decades, even accounting for inflation. But where you withdraw from can significantly affect how much you pay for access to your own money in cash form, according to a recent study by consumer financial services company Bankrate.

Surveying the 10 biggest banks in 25 major cities, researchers found consumers paid the highest surcharges at ATMs in Phoenix, with an average of $3.25. The lowest surcharges, with an average of $2.50, were in Cincinnati. Consumers who did not their own banks’ ATMs in Atlanta were found to pay the highest non-customer fee average at $2.15. Conversely, San Francisco offered non-customer fees at an average of $1.11.

“It all has to do with who the biggest players are in town and how much they charge,” Bankrate senior vice president and chief financial analyst Greg McBride said in a press release. The more options for the consumer, he added, the lower the fees.

But these fees have increased steadily since 1998, even accounting for inflation, according to Bankrate. Though the study described fees in nominal terms, correcting for differences in dollar values reveals a 119 percent increase in non-customer fees between 1998 and 2016, from $1.32 to $2.90 in 2016 dollars.

Why the increase? According to a 2013 Government Accountability Office (GAO) study, overall ATM-related costs between 2007 and 2012 increased, while ATM revenues fell. And for larger banks, hardware and software investments made up a higher proportion of ATM expenses, according to the GAO.

In addition to making up for lost revenues and the high price of providing ATMs, the fees are an easy way to get revenue from customers in need of cash, McBride said, calling the charges “low-hanging fruit.”

But consumers themselves could be indirectly pushing up those fees, as well. With mobile payment apps like Venmo — which charges a 3 percent fee for credit transfers and no fee for debit — and Paypal gaining traction, ATM usage has levelled off or even declined in more developed economies, a possible reason for the machines’ drop in revenue.

Millennials, the United States’ largest generation, prefer mobile banking and payment apps by far over other methods of managing their finances, according to data from consumer insight group MFour. So if the “Me Me Me Generation” has its way, there may no longer be any low-hanging fruit to pick.