ATM user As legislators hammer out the details of a consumer finance bill, one of the proposals in the measure is an appealing one: Sen. Tom Harkin (D., Iowa) introduced an amendment that, if passed, would limit ATM fees to 50 cents.

As The Wall Street Journal recently reported, Harkin came up with the proposed ATM fee based on calculations that the Office of Thrift Supervision made in 1997. They determined the per-transaction cost back then at 27 cents. Harkin figures now, with inflation, the cost per transaction is about 36 cents.
Could be. Sounds good. But is that really the cost per transaction these days? I consulted with several banking experts to get their take on what exactly goes into the cost of an ATM transaction.

According to Dennis Nason, CEO of Nason & Nason, a top banking and finance recruiting search firm, and the former president and CEO of Wells Fargo Bank in Miami, there's more to maintaining an ATM than you might think. The costs include:

The ATM itself. Automated teller machines are either leased or purchased, and Nason estimates that a typical ATM runs about $25,000, a number also backed up on BuyerZone.com, which states that prices can go as high as $30,000. With that kind of pricing, Nason asks, "Do you want it to be a break-even point, or an attractive business for banks or for companies to decide, 'It's not worthwhile. I'm not going to put it in.' If they bring [the fee] down to fifty cents and you have 100 people a day pay fifty cents, that's only $50 a day. You can't amortize a $25,000 machine on a 50-cent fee."

Well, not quickly, anyway. But if 100 people a day paid 50 cents per transaction, an ATM would be paid off within two years and maybe as soon as 18 months. But Nason raises a good point: ATMs don't magically appear at a bank. The bank has to purchase them and then recoup that cost in order to make it worth their while.

The person who fills the machines with cash. These people usually arrive in a Brinks truck, says Nason, and while it may not be a major hassle for a bank to fill its own ATM, it can be another story when you're talking about an ATM at a convenience store or an airport. "If the location is busy, Brinks might have to go there two or three times a week," explains Nason. That's because most machines are stocked with $20 bills, and each machine can only hold between $5,000 and $10,000.

The price of protecting the machine from theft or fraud. Nason rightfully notes that automated teller machines have to come with security cameras and other features designed to prevent criminals from stealing from or defrauding customers, which drives up the cost of maintaining an ATM.

And remember, as Nason points out, banks are out to make money. While it would be nice if they'd install ATMs as a complimentary service and goodwill gesture to the public, that's not likely to ever happen. As Nason puts it, "If there are no fees, what motivation does a bank [or other company] have to put money in an ATM? Why would they install six ATMs at an airport or at a shopping center?" If they can't make money from it, it's a losing proposition for the ATM owner.

Phil Hudson, president and CEO of Aspen Consulting Group in Salt Lake City, does a lot of consulting for banks and financial institutions. A decade ago, he also testified before the Senate and House regarding ATM surcharges. For all the anger consumers often direct at the banks because of rising fees, Hudson says we forget a very salient point. "It's convenient and politically popular to pick on the banks," he said, "but the ATMs in 7-Elevens and gas stations are often not owned by a bank but an independent company." So while some banks may treat their customers like their own personal ATMs, some ATM ire is probably misplaced.

And while Nason disagrees with the 50-cent cap proposal, he does recognize that Congress has a point in wanting to keep the surcharges from eating up too much of a consumer's money. "There has to be some sort of reasonableness to these ATM fees," says Nason. "It's probably [shouldn't be] 50 cents, but it probably [shouldn't be] $3 either."

Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the book Living Well with Bad Credit.

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