ATM Fees: Does Bank Size Matter? ATM Fees: Does Bank Size Matter?

January 27, 2000

ATM networks have allowed banks to charge non-customers for withdrawing money from their ATMs since 1996, but ATM surcharges have been criticized repeatedly by consumer advocates and politicians. Large banks have been especially targeted, because they are more likely to impose the fees and their fees tend to be higher than those charged by small banks. However, surveys comparing ATM fees across financial institutions do not control for differences in quality among banks of various sizes. This article analyzes differences in ATM fees among banks in order to test whether large banks impose higher fees than do small banks. The author uses regression analysis to control for quality and costs of banks' ATM services, as measured by the number of ATMs and the fraction of machines located off bank premises. Banks with more ATMs offer greater convenience to cardholders, and institutions with more off-premise machines tend to have higher costs. The author finds evidence that large banks impose higher surcharge fees, but the difference in foreign fees becomes insignificant after the number of ATMs is taken into account. She notes that there are no economic reasons to ban ATM surcharges, since customers can and, for the most part, do avoid paying surcharges by finding machines that do not impose them.

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