[IMGCAP(1)]
If a debit card issuer has a small number of ATMs, which forces its business card customers to pay surcharge fees to access their money using out-of-network ATMs while traveling, what is a bank to do? Many are opting to join surcharge-free ATM networks.
Last year, Credit Union24, Allpoint National LLC, Co-op Financial Services and MoneyPass Network, four of the nation's largest surcharge-free ATM networks, all reported growth in their number of U.S. locations. And three of the networks reported growth in the number of debit cards they accept surcharge-free, according to the 2010 edition of the ATM&Debit News EFT Data Book, which publishes next week.
Credit Union 24, which serves only credit-union members, reported 50,000 ATM locations as of the end of 2008, up 11.1% from 45,000 a year earlier.
Allpoint, which serves credit unions and banks, reported 35,000 locations, up 9.1% from 32,094. Co-op, which only serves credit unions, reported 28,000 ATM locations, up 12% from 25,000. MoneyPass reported a 35.5% increase in ATM locations, to 16,351 from 12,070.
Last year, MoneyPass accepted 31.9 million debit cards, up from 28% from the 24.9 million in 2007. Co-op Financial Services accepted 26 million debit cards, up 8% from 24 million debit cards in 2007, and Allpoint accepted 12.1 million debit cards, up 27.4 million debit cards in 2007. On the other hand, Credit Union 24 accepted 15 million debit cards in 2008, the same number as in 2007.
Surcharge-free ATM networks appeal to community and regional banks with small numbers of the ATMs because they enable the institutions to compete for customer cash access with large banks such as Bank of America Corp., which operates a national ATM network of 18,500 machines, say Kate Monahan, an ATM analyst for Aite Group LLC, a Boston-based consulting firm. Charlotte, N.C.-based BofA operates the nation's largest bank-owned ATM network.
Earlier this month, for example, PBI Bank, Kentucky's third-largest bank with 18 ATMs, joined Bethesda, Md.-based Allpoint. The agreement gives Louisville-based PBI's customers surcharge-free access to an additional 200 surcharge-free ATMs in Kentucky, 35,000 nationwide and 2,500 in the United Kingdom, says Ben Psillas, president of Allpoint.
But just as important, the deal enables PBI to better compete with national banks that are opening branches in Kentucky, Marie L. Bouvette, PBI president and CEO, said in a statement.
Indeed, surcharge-free ATM networks level the playing field, wrote Franco Turrinelli in an analyst report about Cardtronics Inc., the Houston-based ISO that owns Allpoint. "The company's 30,000-plus domestic ATMs on the Allpoint network are a compelling proposition for these smaller institutions and one of the few methods for them to respond to competitive pressures," Turrinelli said.
Surcharge-free ATM networks also save customers money.
When banks or credit unions join surcharge-free ATM networks, their customers not only do not have to pay surcharge fees, they also do not have to pay their own institutions foreign-ATM fees for using another bank's machines to withdraw funds.
During the past year, banks, which rely heavily on fee income, have increased ATM surcharge and foreign fees, says Greg McBride, senior financial analyst for Bankrate.com, which is based in North Palm Beach, Fla. Last year, banks charged an average ATM surcharge fee of $1.97 compared with $1.78 in 2007. Foreign fees averaged $1.46 compared with $1.25 in 2007, McBride says.
"The fees were at record highs," says McBride, noting some banks charge much more than the averages.
One reason for the dramatic increase in surcharge fees is that fewer cardholders are using out-of-network ATMs, McBride says. "Banks charge higher surcharge fees to noncustomers to support their ATM networks," he says.
Higher surcharge and foreign fees imposed by large national banks on noncustomers, however, provide surcharge-free ATM networks with an opportunity to attract new customers, observers say. "A couple of years ago, cardholders did not think much about paying $2 to withdraw money from a nonbank ATM, but the way the economy is now, attitudes have changed," Monahan says.
Co-op, which is based in Rancho Cucamonga, Calif., helps members locate its surcharge-free-ATMs through text messaging and global positioning systems. "Before you take your next road trip, be sure that you know exactly where to get your cash for free," Co-op instructs on its Web site. " Text your location-address, intersection and ZIP code-to 692667 (My COOP) from any mobile phone or download the database of more than 28,000 surcharge-free ATMs directly to your Garmin, Tom Tom or other GPS device."
Surcharge-free ATM networks charge credit unions and banks undisclosed fees to join their networks.
The networks' business models also vary.
When a credit union joins CU24, which is based in Tallahassee, Fla., for example, the credit union's ATMs becomes part of CU24's surcharge-free ATM network.
Another variation involves Co-op. Co-op grows its ATM network through business relationships. For example, Co-op members can withdraw cash surcharge free from ATMs housed in 7-Eleven Inc. and Costco stores. In addition, credit unions that join Co-op contribute their ATMs to the network, Bill Prichard, a Co-op spokesperson, writes in an e-mail.
In contrast, Allpoint uses parent Cardtronics and hires three other unnamed vendors to build and deploy its ATMs, so participants do not have to include their ATMs in the network. ATM
