The decision by several large banks to boost automated teller machine fees charged to noncustomers has prompted a widespread reconsideration by community banks of their own ATM policies.
For some, that means ending commitments to rebate such fees. For others, such as Yadkin Valley Financial Corp. of Elkin, N.C., it has meant a move to a national network as a way to give customers free access to more ATMs.
Yadkin joined Allpoint after Bank of America Corp. and other large competitors hiked their surcharge fees to $3.
Danny Duggan, the marketing director for the $1.1 billion-asset Yadkin, said his company had been considering the move for months, but B of A’s announcement Aug. 1 was a tipping point, especially since it spurred other banks with large ATM networks to raise their fees too. Yadkin, which does not rebate the fees, thought, “Let’s make it better for our customers now.”
Some community banks that were reimbursing customers for surcharge fees as a way to neutralize large companies’ ATM advantage found that the higher fees made it too expensive to continue.
In the second half of last year the number of banks signing up for the MoneyPass network increased 20% from the first half, according to Doug Miraglia, the network’s president.
MoneyPass, which has about 15,000 ATMs, mostly at bank branches, is part of Elan Financial Services, a processing unit of U.S. Bancorp of Minneapolis. (U.S. Bank was one of the banks that increased its surcharges to $3 in some instances.)
Many of the banks that chose “to go all surcharge-free all the time are now coming back to us and trying to decide how to cut back on their expense, because that’s like a bleeding artery,” Mr. Miraglia said. “You just don’t know how much that’s going to cost you every month.”
Ben Psillas, the president and founder of Allpoint, said that soon after the B of A announcement his company signed a deal that allows the more than 400 banks on the Star debit network to use Allpoint ATMs surcharge free.
Star, which is owned by the Denver processor First Data Corp., has a relatively small ATM network itself, called Starsf. Banks that join Starsf can share one another's ATMs surcharge free.
Tony Emrick, Star’s general manager, said that the decision to join Allpoint came about because of a combination of higher ATM fees and the strategy at many community banks to rebate the fees. Community banks thought, “Wait a second, my expenses are going to go crazy,” Mr. Emrick said.
Allpoint and MoneyPass charge a flat fee based on the number of cards a bank has issued, plus a fee for each transaction. Though the flat fee can vary from one bank to another, both networks charge under a dime per card.
Allpoint, a unit of the Houston ATM deployer Cardtronics Inc., is the larger of the two networks with 32,000 ATMs in stores nationwide. Its flat fee is monthly, while MoneyPass’ is quarterly.
Last week First Bancorp of Troy, N.C., joined both Allpoint and MoneyPass — a decision that observers say could become more popular.
The $2.3 billion asset parent of First Bank, which has 70 ATMs of its own, now gives its customers free access to nearly 49,000 machines.
First Bancorp had not been reimbursing its customers for ATM fees. In fact, it even charges them for using machines other than its own to recoup the interchange fees it must pay.
Joe Arundell, First Bancorp’s marketing director, said his company often encouraged customers to avoid the fees by using the 1,000 ATMs owned by North Carolina State Employees Credit Union, which allows free access to its ATMs.
Surcharge increases by large banking companies prompted First Bancorp to join the networks, Mr. Arundell said. Every time a customer uses a foreign ATM, it could cost them as much as $5, and “that can get a little pricey.”
The fees also gave the large companies an opportunity to lure customers away by saying, “If our ATMs are convenient to you, and you don’t like paying the fee, then open an account with us,” he said.
Joining a surcharge-free network is cost-effective, Mr. Arundell said, considering that deploying one full-service ATM generally costs between $30,000 and $50,000.
“This first year our total expense for providing our customers with nearly 50,000 no-fee ATMs will be less than implementing one full-service ATM,” he said.
Allpoint’s Mr. Psillas said that before the B of A announcement, his network normally signed up about 20 financial institutions a month. After the announcement, he started hearing from bankers in much greater numbers.
“A fair number of the calls were from banks that have incorporated or were thinking of incorporating some sort of rebate strategy,” he said.
Yadkin joined Allpoint in November. The company had been looking for a way to give “our customers options and access to ATMs no matter where they were,” Mr. Duggan said. “We’d been going back forth on it for about nine months before we pulled the trigger.”
His company is acquiring Cardinal State Bank of Durham, N.C., which in May 2005 became one of the first banking companies to reimburse its customers for ATM fees. Back then Cardinal State had only three branches, but it boasted that its customers had free access to 375,000 ATMs, which was the number of machines across the country at the time.
Once the acquisition closes in February or March, Cardinal State customers would no longer get reimbursed for surcharges and would be directed to Allpoint machines.
Mr. Duggan would not specify how much the change would save his company. But he said that Cardinal State is paying more than twice as much money to rebate the ATM fees than Yadkin is paying for Allpoint, even though Cardinal State is much smaller that Yadkin.
