THE ATM SURCHARGE + THE FOREIGN ATM WITHDRAWAL FEE = CHARGING CONSUMERS TWICE

On April 1, 1996, the two largest ATM switching networks, Visa's Plus and MasterCard's Cirrus, followed the lead of several regional ATM networks and ended their prohibition against member banks surcharging non-accountholders using their ATMs. This cruel April Fool's joke allows banks to charge consumers twice to use an ATM only once. The surcharge is in addition to the "off-us" or foreign fees most banks also charge their accountholders to use another's ATM.

An ATM surcharge is an extra fee assessed by an ATM owner for a single transaction. For instance, if an ATM owner adds a $1 surcharge, the typical consumer pays and the ATM owner collects two fees. The consumer's two fees are: (1) the fee their own bank charges to use another bank's (or non-bank ATM owner's) ATM; and (2) the surcharge assessed by the ATM owner and deducted from the consumer's account at the time of the transaction. The ATM owner then collects two fees for one ATM transaction: the first fee comes from the ATM user's bank, via the network used, and the second fee is the surcharge, which is withheld by the ATM owner at the time the transaction is completed.

ATM SURCHARGES CREATE TWO FLOWS OF REVENUE FOR ATM OWNERS

A portion of the ATM fee consumers pay their own bank when they use another bank's ATM is retained by their bank. The remainder is distributed by their bank to the network, which retains a portion and distributes the remainder to the ATM owner. Even if the consumer's bank does not assess a fee, their bank pays the network, which distributes a portion to the ATM owner. Thus, with surcharging, the ATM owner collects two fees for one ATM transaction: one from the network and the other directly from the consumer.

THE ATM SURCHARGE CAN BE ANTI-COMPETITIVE

The Bankers Lobby argues that the marketplace should decide whether consumers want the "convenience" offered by surcharging machines. The true choice for consumers should be between banks that charge high fees and banks that do not. If surcharging contributes to the extinction of small, low-cost competitors, then big banks will be able to increase the high fees that they already impose on their own customers (4). Our 2002 survey shows how banks use their surcharge disclosures to advertise switching to their banks to avoid fees. This practice gives bigger banks with larger ATM networks the opportunity to lure customers from smaller banks and credit unions with smaller ATM networks.

Surcharge bans work the best to protect consumers and the marketplace. Federal Trade Commission (FTC) antitrust attorney David Balto has argued that since small banks and credit unions generally offer higher savings interest rates and lower fees, "by focusing competition on the size of a bank's ATM network [as surcharges do], competition in terms of interest rates and fees may be weakened. " (5)