Consumers Seeing Red over Wave of ATM Surcharges
Keenan, Charles, American Banker
Fourth in a Series
Automated teller machine users are ticked off.
Though customers of banks and other financial institutions have never been thrilled to pay fees of any kind, the recent proliferation of ATM surcharges may be pushing them into outright hostility.
They vented their spleen in responses to the 1997 American Banker consumer survey, consisting of 1,001 telephone interviews conducted by the Gallup Organization during October and November.
Satisfaction with ATM services declined significantly over the last year. Though many use them for most of their banking, ATMs earned a quality rating well below what customers gave to general service levels at their principal financial institutions.
The survey participants-all heads of households with at least one type of deposit, investment, or credit account-were at least moderately satisfied with the availability of ATMs and the services they offered.
But the good news ended there for industry executives intent on keeping their ATM-cardholding customers-a number that held steady this year at 66% of the financial-consumer population-happy.
On a scale of 1 (poor) to 5 (excellent), 38% of ATM cardholders gave "prices charged" a 1. That was up from 24% last year, which was already far worse than the responses in past years' surveys to questions about fees and service charges in general.
When Gallup last asked a nationwide sample of consumers about overall pricing, in 1996, only 5% said their principal institutions were "poor."
Conversely, 28% last year said the institutions were "excellent" in pricing, not a good score but clearly ahead of the 17% in 1997 who gave ATM prices the highest rating.
The feelings ran so deep that credit unions, which do better than other types of institutions on almost all measures of customer satisfaction, did worst in ATM pricing.
Of cardholders who do most of their financial business with credit unions, 43% gave them a 1 on prices, up from 25% in 1996. Commercial banks' "poor" ratings rose to 37% from 25%-both numbers very close to the national averages of 38% this year and 24% in 1996.
"Consumers are mad as hell," said Stephen Cole, president and chief executive officer of Cash Station Inc., the Chicago-based automated teller network.
He and other observers said the obvious culprit is surcharges-the additional fees, now going as high as $2 to $3 or more-that customers pay to withdraw cash from machines owned by companies other than their card-issuing banks. Some customers are also charged transaction fees by their own banks, but those fees tend to be much lower.
"Those customers who now find themselves seeking out ATMs at their own institution are clearly irritated to do so," Mr. Cole said.
Surcharging began to be a national phenomenon in April 1996, when MasterCard International's Cirrus network and Visa U.S.A.'s Plus System gave up their resistance to the practice and changed their rules to allow it.
David Thomas, director of retail distribution for Banc One Corp. of Columbus, Ohio, said "1997 is really the first year surcharging has been widely applied. Now that is beginning to be reflected in the change of customers' attitudes."
One effect of surcharging, which was permitted in 14 states before MasterCard and Visa lifted their bans, has been rampant growth in installed machines, particularly away from bank premises. Faulkner & Gray, a Chicago-based newsletter company owned by Thomson Corp., which also owns American Banker, said the number of ATMs in the United States increased by 19% in the 10 months through June 30, to 165,000.
"The availability of more and more places to get ATM services seems to be overshadowed by the negative reaction to price," said Alan Pohlman, executive vice president of the consulting firm Carmody & Bloom in Ridgewood, N. …