Avoiding ATM Fees

I don't know how you feel about it, but I really hate the idea of paying fees to use an ATM to get my own money from my bank.

In fact, my wife and I have never paid any because we faithfully use only our bank's ATM machines.
But our discipline puts us in the minority. Last year ATM users paid fees that poured an estimated $4 billion into financial institution coffers.

"ATMs are a cash cow for banks," says Edmund Mierzwinski, U.S. PIRG (Public Interest Research Group)consumer program director who also runs http://www.stopatmfees.com/. Even though it is cheaper for banks when you use an ATM rather than going into the bank, he says, they charge more for it.

Expect to pay even more
And the fees are rising. According to the 2001 U.S. PIRG survey of banks and credit unions, the cost of using another bank's ATM machine is now $2.86 per transaction, up from $1.01 just five years ago.

You pay two fees when you stray from your own institution's ATMs. The first hit, charged by your own bank, is called the foreign, or "off-us," fee; it currently averages $1.39 per transaction according to the U.S. PIRG survey. (At big banks, the average is $1.52.)

About 30 to 70 cents of this fee is known as the interchange fee and goes to the bank whose ATM you used as compensation for handling the transaction. Even if your bank does not charge you when you use another institution's ATM, it pays this fee.

The second fee, a surcharge imposed on you by the other bank for using its ATM, is now $1.47 ($1.55 for big banks) according to U.S. PIRG. These fees show up right on your ATM receipt.
This fee is drawing a lot of heat from consumer advocates and some states. So far, Iowa is the only state with an active ban on ATM surcharges. The ultimate fate of the ban is still tied up in court, and there are ongoing court challenges of other bans such as those in San Francisco and Santa Monica, Cal.

The newest fee twist, according to U.S. PIRG, is that some banks, especially large ones, have started "renting" ATM cards to customers for a monthly fee of $1 or so, which would mean adding another $12 or more to your annual cost of using ATMs. Banks point out that the fees pay for more ATMs, making ATMs even more convenient for consumers, and to maintain, protect and advertise ATMs.

Minimize the pain

Whenever possible, use your own bank's or credit union's ATMs, which should avoid all ATM fees. Also try some of these tactics:

Switch to a bank or credit union that doesn't impose ATM surcharges. Generally, the larger the bank, the higher the fees. Smaller banks and many credit unions do not charge surcharges at all. Find out if you can join a credit union.

Bankrate.com also surveys ATM rates for large banks and thrift institutions in 35 major metropolitan areas. In the Washington, D.C. area, for example, Citibank stands out as a deal; it charges $1 for both its foreign fee (for customers who use other ATMs) and its surcharge (for non customers using its ATMs).

See if your area has a regional alliance of banks or credit unions whose members agree not to impose surcharges on each other's ATM customers. This multiplies the number of surcharge-free ATMs available in an area.
See if you can get back some extra cash

when you swipe your ATM card through an electronic terminal at the check-out counter in a supermarket or convenience store. About 82% of banks do not impose a surcharge on those transactions, says Greg McBride.

Beware of non-bank ATMs

that are not near banks, such as mobile ATMs at sporting events, in bars or at festivals, for example. Fees there are often higher than at banks.
Use travelers' checks or credit cards

when you are on the road (but not credit card cash advances, which are even more expensive than ATM withdrawals). If you are traveling outside of the U.S., ask your bank if any additional fees or surcharges apply to ATM transactions abroad and switch institutions if they seem too high.