Commerce abolishes ATM fees for larger customers

Westchester County Business Journal, Aug 15, 2005 by Gurliacci, David

Banks once fought state regulators for the right to charge customers for using competitors' automated teller machines, but one bank is now offering to pay all ATM charges, no matter what machines customers stick their cards in.

Commerce Batik, which has five branches in Westchester County, recently announced it will pick up the ATM tab for any bank customer with an account containing $2,500 or more. The bank will even pay ATM charges assessed by other banks; on Commerce customers.

"We believe this is a retail business and it's about giving a customer a great retail experience every stop of the way," said Vernon W. Hill, founder and chairman of Commerce Bank. "In return, the customer will give its more of their deposits."

"We want to remove whatever annoys our clients and nothing annoys them more than ATM fees," he said.

It's a pretty unusual strategy," said Kevin Timmons, senior banking analyst at the Albany office of C.L. King & Associates, an investment research firm. "Their strategy is about growing their deposit base. with the expectation that growing their deposit base will grow their business."

Back in 1999, Fleet Bank won a three year court fight against Connecticut officials to defend its tight to assess customers., it surcharge for using other banks' ATMs. Those surcharges were on top of the fees that the ATM owners assessed.

Since 1999, said Greg McBride, senior financial analyst for Bankrate.com, "The prevalence of these fees has grown till it's almost unusual not to be charge. by one or both parties."

Average ATM fees have grown from $1.19 in 1999 to $1.40 today and surcharges have grown from $1.16 to $1.35, McBride said. According to Commerce Bank, studies have shown ATM users incur about $4.2 billion in total fees annually, with the average ATM user paying about $126 in annual fees.

If other banks follow the policy of Commerce, it will likely be the regional and small banks because they can't offer customers large ATM networks, McBride said.

So many stores now offering to allow customers to withdraw cash from their bank accounts with debit cards that customers are less concerned with ATM fees nowadays, said John D'Agostino, senior vice president and director of' retail banking for Orangeburg-based Union State, Bank. Thats one reason his bank doesn't offer free ATM service, he said.

"The need for people to go to ATMs has really declined over the last two or three years," he said, "with so many retail outlets now offering that same service at no charge ... I can't think or any supermarket that doesn't offer cash back."

But McBride disagrees: "It's still an annoying fee because its so prevalent and the fee itself continues to rise."

In separate interviews, John Ritacco, president and chief executive officer of Community Mutual Savings Bank in White Plains and Richard McStravick, president of Sound Federal Savings Bank, also in White Plains, said they haven't considered having a no-ATM-fee policy for the bank. Each bank president said he wonders whether some customers might take offense that only larger depositors were offered the elimination of fees. Neither said they were opposed to the idea.

Officials at The Bank of New York, Citibank and M&T Bank could not be reached for comment on ATM fees.

A spokeswoman for Washington Mutual Bank said that bank does not charge anyone for use of ATMs. A spokesman for Citibank said that with 2,600 ATMs owned by the bank in New York state, the need to use, other bank ATMs was considerably lessened.

WORLD'S BIGGEST ATM NETWORK

John Carusone, president of the Bank Analysis Center in Hartford, Conn., called the Commerce policy "an attractive move" that should give the bank more appeal to high-balance customers.

McBride also thinks the Commerce Bank move is a shrewd one, designed to eliminate the advantage that large, banks, with huge ATM networks, have over regional and small banks.

Bank of America, Wachovia and Washington Mutual all maintain enormous networks or ATM machines, he pointed out. Now the highend segment or Commerce customers have, Free access to all of them.

For that reason. McBride said, "This isn't only as good as anything these banks can offer in terms of ATM access, it's better."

Maintaining that policy may be hard for Commerce Bank in the long run, Timmons said, because it can get costly. He wondered how long the bank would continue it.

"They said the same thing when we went to seven-days-a-week branch banking." Hill said, adding that that policy has continued for years. Coin-counting machines that the bank provides in its branches were also looked on with skepticism by critics in the industry, he said. "We continue to not only do it, but improve the experience."

McBride and Carusone aren't so sure the move is all that costly. Carusone said the bank will earn interest from the money in the checking accounts. McBride said the fee will only affect a minority of bank customers that keep that much money in their checking accounts. Most customers find it difficult to keep that much cash in checking.