Though it previously criticized the practice, First Chicago NBD Corp. will begin charging other banks' customers for using its automated teller machine network next month.

Beginning June 1, First Chicago will charge $1 to any noncustomer who uses its 710 Chicago machines, by far the city's biggest network. In July or early August it will begin assessing an undetermined fee at its remaining 700 teller machines in Michigan and Indiana.

The $109 billion-asset banking company is the biggest in the Midwest and one of the last to slap other banks' customers with an ATM fee.

When ATM owners were allowed to assess such fees last April, First Chicago officials said they had no plan to charge. In fact, a spokesman said First Chicago opposed the measure a year earlier when it was being voted on by the board of directors of the regional ATM network Cash Station.

"Banks vacillate in their willingness to be out front on these issues," said James McCormick, president of First Manhattan Consulting Group. However, by yearend, he said, nearly every bank will be surcharging.

"There are two must-do's to underpin the financial health of retail banking," Mr. McCormick said. "One is selectively paying higher rates on deposit accounts. The other is to get paid for the value provided for convenient transactions."

First Chicago said revenue from the fees would help it pay for 500 new ATMs-175 in Chicago-by yearend 1998.

From a public relations standpoint, the move is going to test First Chicago's mettle once again. The company is still smarting from the outcry that resulted when it became the first bank to assess a $3 teller fee on some of its accounts two years ago.

St. Paul Bancorp, with its 470-ATM network, made it more palatable for First Chicago to surcharge by imposing its own $1 fee in January.

Donald Ross, senior vice president and director of retail banking for St. Paul, said he believes First Chicago would have imposed a fee earlier had it not been for the "public relations nightmare" stemming from the teller fee.

Thomas Kelly, a First Chicago spokesman, said 35% of Chicago-area ATMs charge fees and his company wanted to be competitive. "As you compete for locations, you're at a disadvantage when you're competing with (banks) that surcharge," he said.

However, most major competitors in Chicago, Detroit, and Indianapolis have held off on surcharging, waiting for First Chicago to jump.

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