ATMs getting cheaper to use

As competition grows, banks cut fees that annoy many customers and expand their networks


Hoping to win over customers in an increasingly competitive market, banks are expanding automated teller networks, eliminating fees or even eating the costs associated with ATMs, the devices that transformed consumer banking during the past generation, but whose fees have become an irritant for many.

Citigroup Inc., the nation's largest financial-services company, announced yesterday a deal to put its ATMs in 7-Eleven convenience stores, including dozens in the Baltimore area, where Citibank customers will be able to withdraw money without having to pay fees.

Earlier, other banks made similar moves, and M&T Bank Corp., which has a major presence in the Mid-Atlantic region, said in recent months that it would drop charges for everyone, whether a customer or not, at ATMs in Sheetz convenience stores.

First Horizon National Corp. of Tennessee, as part of its push into Baltimore later this year, plans to reimburse customers for ATM fees they incur.

Those actions fall far short of an end to ATM fees, but industry experts said consumers should benefit as banks try to lure customers with more convenience and lower costs.

ATM fees have risen steadily over the past decade. Last year, they totaled a record $4.3 billion, about $2.90 per transaction, according to, up from $3.8 billion in 2004.

"It's about buying market share," said Jerry Silva, research director at TowerGroup, a financial-services consulting firm. "ATM fees have become a very sensitive issue for consumers, and so banks have been trying to eliminate some of those hassles."

Most banks don't charge their customers for using their ATMs but do charge customers for going out of network, and those fees show up on bank statements. In addition, banks and third-party operators often levy a surcharge for use of their ATMs, and the machines typically prompt customers to accept the fee before dispensing cash.

The proliferating fees have driven consumers to find ways to avoid getting slapped with charges. According to a recent survey by Forrester Research Inc., 88 percent of consumers said they avoid using out-of-network ATMs because of the fees, and nearly 60 percent said they minimize ATM fees by withdrawing cash "to last a while."

Betty White, a Baltimore resident, said she goes out of her way to find ATMs within her bank's network and that when she finds one she withdraws more cash than she needs to avoid another ATM hunt.

"You shouldn't have to pay to take out your own money," White said.

By offering consumers ways to get around fees, banks reduce the revenue from ATM fees, but experts say the payoff could be greater. Lower ATM fees, they say, could draw more customers and engender customer loyalty.

"Banks have embraced consumer banking and really want to attract that business," said Greg McBride, senior financial analyst with "They're starting to realize there's a fine line between generating fee income and alienating customers."

Citibank, which had a relatively small presence beyond New York, will have one of the largest networks, with 8,000 locations, once the 7-Eleven ATMs are installed, said Jeff Pearlberg, director of national sales and marketing. Citibank customers will save an average of $67 a year in surcharges, the company said.

Other banks have made similar deals with retailers. Last month, Philadelphia-based Sovereign Bank announced an agreement to place nearly 900 ATMs in CVS pharmacies in the Northeast. Sovereign customers won't have to pay a surcharge at those locations, the bank said.

Last year, JPMorgan Chase & Co. reached an agreement with the Duane Reade chain to put ATMs in its 270 drugstores.

Such deals, pioneered by Wawa Food Markets a decade ago, help the banks widen their brand recognition and increase foot traffic in the retailers' stores.

Industry observers say that as the arrangements become more popular, banks will scramble to secure the best sites in the most popular stores.

"Land rush may be too strong a term, but we're seeing more and more trying to stake out territory outside their branches," said Bert Ely, an independent banking consultant.

The new ATM sites also reflect a "societal shift" in the way consumers do their banking, said Mike Piemonte, senior vice president at Buffalo, N.Y.-based M&T. In addition to its deal with Sheetz, M&T eliminated surcharges at its ATMs in Rutter's Farm Stores, a chain in Pennsylvania and Maryland.

Unlike arrangements that benefit only a bank's customers, M&T said it wont slap surcharges on any customer in those stores. Those customers might be charged by their banks, however, for going out of network.

"In the old days, the only time you thought about going to the bank was when you went to the bank," Piemonte said. "Now it's when you go to get groceries or to get gas."

Smaller banks and those new to a market have found other ways to reduce fees. Some community banks have banded together to form surcharge-free alliances to offer customers more places where they can withdraw money without fees. Other banks are reimbursing clients for all ATM fees, no matter where they are charged.

First Horizon, which has several mortgage offices in the Baltimore area, plans to open as many as seven full-service banking branches within a year in the area. Because the bank won't have an ATM network, it won't charge fees and will pay for any surcharges clients incur at any ATM.

The bank might reinstate fees after establishing a foothold in the region, said Charles F. Black, president for the Baltimore area. Until then, he said, the bank "doesn't have a lot of options."

"In order to be compete with more entrenched financial institutions in this market," he said, "we'll have to give the ATM fees back to the client, in essence."

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