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Typically a bank will bill a customer twice for withdrawing cash from a machine owned by someone else: the bank's fee, generally $1 to $2, plus the transaction cost imposed by the ATM's owner.
Effect of dropping charges on average customer unclear
Using a bank's own ATM is universally free, but typically a bank will bill a customer twice for withdrawing cash from a machine owned by someone else: the bank's fee, generally $1 to $2, plus the transaction cost imposed by the ATM's owner.
According to the research firm Bankrate.com, ATM fees are projected to total $4.2 billion nationwide this year and to make an important contribution to bank profits in the obscure "other income" line.
But a handful of banks have dropped their fees and will absorb the fees of others, sometimes only if an account remains above a minimum balance.
Whether others will follow is a point of debate.
Almost all banks adopted free checking accounts about four years ago after that gained popularity among community banks and credit unions.
PNC decided in August to waive all ATM fees if a customer averages a $2,500 monthly balance, in part to induce people with multiple accounts to consolidate them there.
"People don't like the idea of paying just to get access to their money," PNC spokesman Patrick McMahon said.
No Charge To Use ATMs
TD Banknorth, trying to make a name for itself in New Jersey after its purchase of Hudson United Bancorp of Mahwah early this year, announced in June that it would not charge for use of ATMs at all.
Among customers of the Parsippany branch of Commerce Bank, which dropped its fees several years ago and waived other charges last year if a customer keeps a $2,500 minimum daily balance, the concept gets good reviews.
"I think it's fantastic," said Neil Smith of Parsippany. "I think the banks are overcharging for it."
Gabrielle Hoyt of Parsippany said, "It's one of the things I like about this bank."
However, the benefit of waiving ATM fees to the average consumer is not as clear as it was with free checking, Bankrate.com senior financial analyst Greg McBride said.
Tying no ATM fees to a minimum balance of $2,500 may not pay off because the savings would not equal the interest earnings lost in a checking account, he said.
"All you really have to do is plan your cash needs ahead of time," he said. "Friday night comes at the same time every week."
Tom Ficcio of Denville, another Commerce customer, said the bank's ATM fee policy made no difference to him because he confined his transactions to the bank's machines.
Some in the banking industry believe that Washington Mutual's experience points to the limited appeal of dropping ATM fees.
The bank has quietly shelved an experiment of letting anyone use its ATMs for free but has dropped its fee for customers using non-Washington Mutual machines.
However, it does pass on the machine owner's charge.
"I think the jury is still out on this," said Jeffrey J. Buonforte, executive vice president and chief retail officer of West Milford-based Lakeland Bank.
"Sadly enough, we are in an industry where we give profitable things away."
He said Lakeland plans to keep its $1-per-transaction ATM fee plus passing on the other bank's charge partly because the income helps fund other services and partly to recoup the costs imposed by the companies that process the transactions.
In addition, bank officers are concerned that it is hard to measure the financial impact of dropping all ATM fees.
Instead, Lakeland prefers to sway customers by other means, such as offering an interest-bearing checking account with no minimum balance for customers with direct deposit of their paychecks.
He said the bank also is looking at linking up with other ATM networks to provide a greater geographic spread of free machines.
"There is so much emphasis put on fees that we forget about quality of service," Buonforte said. "We at Lakeland like to think that matters."
However, he added that the bank was watching to see which way customer sentiments flow.
"Whether we will maintain our (ATM policy) down the road remains to be seen," he said.
Tim O'Reiley can be reached at (973) 428-6651 or toreiley@gannett.com.
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