ATM Surcharging: The Consumer Perspective
April 1, 2000
Sponsored by: PULSE ® EFT Association
Source: PULSE ® EFT website
Prepared by: Dove Consulting, Inc. and Analytica, Inc.

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Late in 1999, in an attempt to fully appreciate the attitudes and behavior of ATM users who have been exposed to surcharges for nearly a decade, consumer research was initiated. This report provides the results of the consumer study.

Consumers who live in states considered 'mature' surcharging environments and are active ATM users were selected to participate in this study because they have had the most time to react to ATM surcharging. Therefore, they are likely to be indicative of the overall U.S. population once surcharging in other states becomes more established. To the best of our knowledge, this study represents the first time consumers in a 'mature' surcharging environment have been directly surveyed as to their understanding of and feelings towards ATM fees.

Much attention has been paid in recent years to the issue of ATM surcharging. This is the term used to describe the fee that an ATM owner charges a non-customer for the use of that ATM owner's machine.

ATM surcharges first appeared in Texas in the late 1980s as a consequence of a court-ordered arbitration hearing which forced the PULSE ® network to accommodate these fees. But it was not until April 1996 that surcharging gained attention nationwide. (It was then that many of the nation's largest EFT networks - the companies that connect ATMs owned by different financial institutions - lifted their internal prohibitions on surcharging.)

Surcharging dramatically changes the economics of ATM ownership. The opportunity to collect a surcharge allows deployers to place ATMs in many locations that previously could not support a terminal because of low transaction volume. Between 1996 and 1999, the number of ATMs deployed in the U.S. increased by 63%, from 139,000 to 227,000 - a net addition of 88,000 machines 1 (Bank Network News). By comparison, in the prior three-year period (1993-1996), the number of ATMs deployed in the U.S. grew by only 44,000 machines.

Despite the growth of the ATM terminal base and the corresponding increase in consumer convenience, surcharging has provoked angry sentiment from convenience fee opponents and numerous legislative battles. Although no ATM surcharge ban has withstood a court challenge to date, the issue continues to simmer.

Key Survey Findings
In a survey of 700 randomly selected consumers who hold ATM cards, respondents overwhelmingly report that they are aware of ATM fees and that these fees are adequately disclosed. Consumers also report that they are aware of alternatives to ATMs for accessing cash, and that they have changed their behavior to take advantage of these alternatives.

  • ATMs remain consumers' preferred method for obtaining cash by a margin of eight-to-one.
  • The vast majority (86%) of consumers feel adequately informed about ATM fees.
  • Of consumers who have paid a surcharge within the last 14 days, a full 96% reported that ATM fee disclosures are sufficient.
  • The vast majority (82%) of consumers feel that they have adequate access to cash without having to pay a surcharge.
  • Consumers have responded to ATM surcharging by increasing debit and credit card usage and by getting cash from other sources more frequently.

Through this survey, consumers have strongly indicated that the current level of fee disclosures for ATM transactions is sufficient and that they have changed their behavior in response to ATM surcharges, indicating that the marketplace is working.
PULSE ® EFT Association, the largest EFT network in the southwestern United States, commissioned Analytica, Inc. and Dove Consulting to jointly conduct a study of consumers' reaction to ATM surcharging.

Phone interviews were conducted with 700 consumers in seven states that are considered 'mature' surcharging environments (Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Tennessee). A 'mature' surcharging environment refers to a state where surcharging has been permitted since before April 1996, when surcharging began to spread nationwide.

Interviews were conducted during February and March of 2000. Participants were screened to ensure that they are ATM card users (a requirement for inclusion in the study was having used an ATM card at least once in the last two months) and are not employed in the advertising, public relations, market research, or financial industries.

Participants range in age from under 18 to over 75 and are spread across all income levels. 49% are male, 51% are female. This is a population of frequent ATM users: on average participants reported having used an ATM 1.9 times in the previous 14 days.

Current Consumer Behavior
Consumers report that ATMs are by far their preferred source for getting cash - by a margin of eight-to-one.

Moreover, consumers pay surcharges infrequently:

  • Even though 75% of consumers report ATMs as their preferred method for getting cash, only 58% report that they have ever paid a surcharge.
  • Nearly 80% of survey respondents had not paid a surcharge in the previous 14 days.
  • Survey respondents - a population that uses ATMs frequently - only pay surcharges about 20% of the time (based on the number of times respondents conducted an ATM transaction and the number of times they paid a surcharge).

These figures indicate that consumers highly value the ATM channel and the convenient access to cash that it provides. The low percentage of surcharging transactions indicates that consumers have adequate access to ATMs that do not surcharge them - either because they are customers of the financial institution that owns the ATM or because the ATM is surcharge-free.
Consumer Awareness - Awareness of Surcharging Fees
The vast majority of consumers report that they are adequately informed of ATM fees:

  • 86% of consumers feel that their financial institution keeps them adequately informed about the ATM fees that it charges them.
  • The majority of respondents are made aware of the surcharge amount either via a message on the screen or a sticker on the machine.
    - Current EFT network rules require such disclosure. Therefore, the survey results support the claim that these disclosure requirements are sufficient and no further disclosure requirements are necessary.
  • 36% of consumers have refused to complete at least one ATM transaction because of notification by the ATM owner of a surcharge.
    - This indicates that consumers are aware of the surcharge amounts assessed by ATM owners, are in a position to terminate ATM transactions based on fee disclosure, and feel comfortable doing so.
  • Only 12% of consumers feel that they are not adequately informed of the surcharge amount when they use an ATM that assesses a surcharge.
  • More strikingly, those who pay the most ATM surcharges are also the best informed.
    - 96% of consumers who had paid a surcharge in the previous 14 days feel adequately informed about ATM surcharges.
    - Nearly all ATM surcharges are paid by consumers who are aware of and understand the fees, and who are making a conscious decision to pay for the convenience of using that ATM at that time.

The fact is that consumers are aware of ATM fees and of their alternatives for getting cash that are free.
Awareness of Card Usage Options
One of the alternatives to paying ATM fees is using an ATM/Debit card to make a purchase or to receive cash back. Once again, the majority of consumers understand that their ATM/Debit card can be used at retail locations in addition to ATMs.

In fact, consumers use their cards for purchases even more frequently than they use them for ATM transactions:

  • Average POS usage in the previous 14 days was 2.5 times per survey respondent, versus 1.9 ATM transactions per respondent.
    - Online debit (i.e. when the consumer enters a PIN to authorize the transaction) was used for 55% of POS debit transactions, slightly more than offline debit (i.e. when the consumer signs the receipt to authorize the transaction).
  • Consumers are aware of both the types of merchants that offer the option of cash back, as well as specific store names.
    - Grocery stores were the most popular response for store type, followed by gas stations and drug stores. (Indeed, these are the three retail channels where cash back is most frequently available.)
    - WalMart, Sam's Club, Albertsons, K-Mart, HEB, Kroger, Target and Walgreens were all reported as stores that offer cash back. (Indeed, all eight of these retail stores offer cash back.)

Awareness of Alternatives to Surcharging
Consumers understand that there are numerous alternatives to paying ATM surcharges:

  • Use an ATM owned by your financial institution.
  • Use an ATM that does not surcharge.
  • Use an ATM owned by a financial institution that is a member of a selective non-surcharging alliance (your financial institution must be a member of the alliance too).
  • Visit a teller at one of your financial institution's branches.
  • Use an ATM card, debit card, credit card, or check to make a purchase instead of cash.
  • Use an ATM card to make a purchase and request cash back.

Over four out of five consumers (82%) report that these alternatives provide them with adequate access to cash without having to pay a surcharge.
How Consumers Have Adapted Their Behavior Because of ATM Surcharging
Surcharging's Effects on ATM Usage

Consumers were asked how ATM surcharging has affected their use of ATMs.

While most consumers have modified their behavior due to the growth of ATM surcharges, only 5.7% of consumers have stopped using ATMs that surcharge (including those consumers who have stopped using ATMs completely). 21% of consumers have not changed their behavior at all.

With the existence of so many alternatives for getting cash, surcharging has discouraged only a handful of consumers from continuing to use ATMs.

Surcharging's Effects on Getting Cash
Consumers were asked how ATM surcharging has affected the methods they use to get cash (respondents could choose more than one answer).

These figures support the fact that consumers have adequate alternatives to paying surcharges and that they take advantage of them.

This paper summarizes the key findings from a survey of consumers in a mature surcharging environment and their response to ATM surcharges. As such, this paper offers one of the only perspectives on the ATM surcharging debate from the consumer viewpoint.

The survey found that the vast majority of consumers enjoy the convenience of ATM ubiquity and feel adequately informed about surcharging fees and the available alternatives. In fact, 96% of consumers who had paid a surcharge within the last 14 days reported that current fee disclosures are sufficient.

Furthermore, the survey found that consumers have modified their behavior in such a way that they use surcharging ATMs only when it is convenient for them and when they have decided that it is worth the cost of doing so.

Rather than being anti-competitive and limiting consumer choices, ATM surcharging has made it possible for ATMs to expand into locations where they could not have existed before surcharging was allowed. And, from a consumer point of view, the regulations currently governing ATMs are adequate to inform and protect consumers.

About the Study Participants
PULSE ® EFT Association is a shared EFT network serving more than 2,100 banks, credit unions and savings and loans in a nine-state primary service area including Alabama, Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee and Texas. The network processes in excess of 40 million transactions monthly and features more than 52,000 ATMs and 229,700 PULSE ® PAY point-of-sale terminals in all 50 states. For more information, visit the PULSE ® web site at

Dove Consulting is an international management consulting firm that has been advising clients in the financial services industry since the early 1980s. Dove works with a variety of financial institutions, processors, associations and EFT networks, primarily focused on strategic business analyses. For the U.S. Treasury Department, Dove recently designed a framework for a new deposit account to be targeted at formerly unbanked consumers, the Electronic Transfer Account. For more information, visit the Dove web site at

Analytica, Inc. is a Houston-based research organization founded by Rice University Marketing Professor Dr. Richard R. Batsell. Analytica has conducted numerous consumer research studies for a variety of banking and non-banking clients. In early 1999, Analytica led a national research project to investigate the impact of ethnicity on ATM card usage.

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