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Credit Unions on the Hunt for Small Banks
After the Equifax Debacle, Does Your Bank Have Your Back?
Is Your Credit Union a Part of the Shared Branch Network?
New ATM Fees at Chase and PNC - How It May Affect Your Interest Rates
More large banks are adding new ATM fees. In February I reported on TD Bank's new ATM fees. News reports came out in early March on PNC Bank's new ATM fee policies that will take effect later this year on its free checking accounts. PNC will no longer reimburse free checking account customers who use ATMs of other banks. And yesterday, the Wall Street Journal reported on Chase Bank testing new higher ATM fees in Texas and Illinois for non-customers who use Chase ATMs.
Update 5/3/2011: It has been reported that Chase is ending the higher ATM fees for non-customers in Texas and Illinois.
Banks' Excuses for Higher Fees
As the WSJ article described, banks are trying to replace revenue that's expected to be lost from last year's overdraft regulation. They are also adding fees in preparation of the new debit card regulation that's scheduled to take effect in July. That regulation would lower the fees that banks charge merchants for processing debit card transactions. However, justifying new fees due to the debit card regulation is premature. The New York Times reported that a bipartisan group of 9 senators introduced a bill on Tuesday that would delay that new regulation by two years to allow for a study to be done.
PNC Bank ATM Fee Changes
PNC Bank currently offers reimbursement of non-PNC Bank ATM fees with a $2,000 minimum average monthly balance. According to the Pittsburgh Post-Gazette article, free checking account customers will have to start paying if they want to use another bank's ATMs. Changes take effect on March 27 for new customers and September 12 for existing customers.
Chase Bank ATM Fee Changes
The new ATM fees at Chase will only affect non-customers. Instead of paying $3 for withdrawing money at Chase ATMs, non-customers will pay $5 in Illinois and $4 in Texas during this testing phase according to the WSJ article.
Higher Costs for Banks That Reimburse ATM Fees
These higher fees may affect banks which reimburse their customers when they use other banks' ATMs. That reimbursement is becoming more costly, and the more banks pay for ATM fee reimbursements, the less they will pay out in interest.
Some of the popular internet banks that have generous ATM fee reimbursement policies include Ally Bank, Incredible Bank, USAA Bank and Charles Schwab Bank.
In addition to internet banks, ATM fee reimbursements are popular for reward checking accounts. Some banks provide unlimited ATM fee reimbursements if you meet the monthly reward checking requirements. With banks like Chase increasing fees, this unlimited reimbursement policy will become more costly. It will have less effect on banks that limit their reimbursements. For example, Coulee Bank currently limits ATM fee reimbursements to $20 a month.
If your main concern is interest rate, banks that offer unlimited ATM fee reimbursements may not be the best choice in the long term.
"However, justifying new fees due to the debit card regulation is premature. The New York Times reported that a bipartisan group of 9 senators introduced a bill on Tuesday that would delay that new regulation by two years to allow for a study to be done."
So do you think that if the debit card swipe fee regulation is delayed or cancelled the banks will roll back their preemptive fee increases? I think not.
Additionally, PNC is lowering the minimum balance requirement on its Performace checking account (its premium checking account, providing most services for free) to $1,500 (or $2,000 in monthly direct deposits or $10,000 across all deposit & credit accounts). This seems to be a direct hit at Chase, which has similar requirements for its standard checking account (and competes with PNC throughout most of its footprint).
I suspect PNC's moves were in response to last year's overdraft regulations and the subsequently changing bank retail environment. PNC has stated that 70% of its consumers have a free checking account and it'd like to reduce that number in half, so perhaps the bank was worried about consumers fleeing so it imposed (mainly) friendly changes.
We would not be in this situation now if Congress back when Reaqan was president had not gotten rid of the law that barred banks from charging a fee to non-customers for use of their ATM. Conveniently, they left the law intact that requires your bank to pay the other bank when you use the ATM, meaning that other bank is getting over and over again.
At that time, your bank was required to pay the bank whose ATM you used a fee of 50¢. That was based on the finding that it cost the other bank 25¢ to provide that service -- meaning, it gave the other bank a 100% markup, and very generous profit level.
What we now have is that your bank has to pay the other bank that fee (I haven't heard of it being changed from 50¢). And then you have to pay a LOT more to that bank. Now, if this doesn't make the robber barons of old look like a bunch of Sunday school children, I don't know what does. As of now, some banks are collecting $5 50¢ = $5.50 for what costs them 25¢ to provide. They can make a lot without charging the actual user anything!
But food for thought: When that change was made in the mid 1980s, it was pushed by the big banks, who wanted to use fees as a means to try to force people to leave smaller banks and use the big banks -- because of course, smaller banks don't have all the locations for providing ATMs and the big banks do. That is, if you wanted to be able to use your ATM card free, you better have your account with the big banks.
But the smaller banks at that time took on the challenge. They organized together into a coalition of ATMs in which they provided fee-free access to their ATMs to account holders in any other bank in the coalition. At some point in the mid to late 1990s, for reasons I don't know, this coalition ceased to be. But the very same type of coalition remains in place among most credit unions, most of whom also allow you to use another credit union's branch to make transactions.
The smaller banks also started the practice of reimbursing ATM fees.
Notice that these new, very high fees are being brought by the big banks. This is somewhat of a throw back, gouging users from other banks, kind of pushing you to move your account to a big bank with plenty of ATM locations so that you don't have to pay such large fees for ATM use.
This means the smaller banks face the same problems they did back in the 1980s when fees were first instituted. If they aren't sleeping at the switch, they will realize that they have to address those fees one way of the other or lose customers. If they don't want to pay such exhorbitant fees as $5 to reimburse customers, then they better reform that coalition so you can use ATMs free at all the banks in the coalition. I would recommend that they all just join the credit union coalition already in place.
The big banks are acting against the well being of consumers and gouging at what I would call a seriously criminal amount. Tell them to go to hell. If everyone were to stop using their ATMs, they would get no fees -- not even the 100% markup of 50¢ from your bank. Unfortunately, American consumers no longer have the character or mindset to carry out such a boycott.
Meanwhile, tell the small banks they have to act on your behalf and provide for you -- or they can lose your account. They can arrange a coalition that would provide a lot of fee access to ATMs all over and cost them little to nothing, or they can reimburse you the $5 each time you use the other ATM. They are NOT providing you ATM with your account if they do not have a network all over that you can use free. It saves them a lot of money if you use an ATM rather than going to their branch and use a bank clerk -- that is plenty enough money saved for them to pay an ATM fee for you or get into a coalition so plenty of ATMs are available free to you all over thee country -- they will actually come out ahead for it.
PNC still seems to be consumer friendly; since they' still offer the free checking account. Plus, PNC now offers 3 different credit cards (and they seem to favor customers with either Performance or Performance Select checking account).