Citicorp Decides to Eliminate ATM, Electronic Banking Fees

Journal Record, The (Oklahoma City), May 24, 1995 by Rebecca Cox

NEW YORK _ Citicorp will eliminate all fees for using its automated teller machines and other electronic banking services to encourage customers to use tellers less, the bank said Tuesday.

The nation's largest banking company said the changes apply in the New York metropolitan area and Connecticut, the heart of Citicorp's consumer market.

"The main thing is to encourage more Citicorp customers to try the home banking services," said Brown Brothers Harriman Co. bank analyst Raphael Soifer. The move also "adds to the pressure on other banks."

New York-based Citicorp is a bellwether for the industry, and its moves are often followed by other major banks. In late 1991, for example, competitors mirrored Citicorp when it cut the rate on its interest-bearing checking accounts to 2 percent. At the time, other major banks offered an average rate of 4.8 percent.

"Obviously, in New York as in every other market, everyone prices competitively," said Citicorp spokeswoman Maria Mendler. She said customers will continue paying a $1 fee to use non-Citicorp ATMs.

Willy Socquet, Citicorp's head of consumer banking in New York, said consumer already conduct 80 percent of their transactions electronically.

"Their message has been clear," he said. "They want us to continue making it easier and less costly."

One Citicorp competitor, Bank of New York Co., doesn't charge customers to use its ATMs as long as they maintain a $1,500 minimum checking account balance or open a savings account. Other customers pay 25 cents a transaction. The company doesn't have any plans to change its fees on other electronic banking services, a spokesman said.

At Chemical Banking Corp., ATM transactions are free for customers with $3,000 in checking or $6,000 in all accounts. Other customers with less in their accounts pay 50 cents to use Chemical's ATMs and $1 to use other bank's ATMs. The company charges $10.95 a month for home banking on the Prodigy network. The company doesn't provide a video-screen telephone service.

Spokesman Ken Herz declined to comment on whether Chemical planned to change its fees.

Charlotte, N.C.-based NationsBank Corp., the country's fourth-biggest bank, said it doesn't charge fees for bank customers who use its ATM. A company spokeswoman said she had no information on fees for the bank's electronic banking services.

Electronic services such as ATMs are in greater demand by time-pressed consumers. They also are far less expensive to provide than teller services, where each transaction costs about 10 times more to process than its electronic counterpart.

The high cost of delivering personal service recently prompted a number of major banks to take moves encouraging customers to use electronic banking services.

Last month, First Chicago Corp. said it will charge some customers $3 to use a teller when an ATM would do. Meanwhile, PNC Bank Corp. in Pittsburgh plans to close as many as one-third of its 600 offices and boost its telephone banking operations. And Huntington Bancshares Inc., of Columbus, Ohio, is beefing up all-machine bank branches with interactive video terminals.

By eliminating fees on electronic banking service Citicorp will sacrifice revenue, although it's minuscule compared with Citicorp's total.

Citicorp's Mendler said the company will lose about $10 million a year in fees from the move. In 1994, Citicorp earned fees and commissions of $5.16 billion and posted net income of $3.37 billion, or $7.15 a share.

Citibank, Citicorp's main unit, now charges customers 35 cents to use its ATMs if they have checking account balances of less than $2,000, or combined deposits of less than $6,000. For customers with bigger balances, the service is free.

For Citibank's bill payment service, all customers pay $3.50 a month. Customers with less than $2,000 in checking or $6,000 in deposits also pay 35 cents a transaction.

Customers banking at home using PCs pay a monthly fee of $9.95, while video-screen telephone banking customers pay $15 a month on top of a one-time fee of $50. In the future, screen phone users will only$pay a monthly fee of $9.95 to the screen's manufacturer.

Citibank's small business customers pay $55 a month for banking by personal computer. That fee also will be eliminated.