Financial Focus: When did a $5 lunch become $13? The Sad Cost of ATM Fees
By Anthony C Rivieccio, MBA, PFA
Responding to several hundred constituent phone calls to his office about skyrocketing ATM fees, New York Senator Charles Schumer this week called on the federal Consumer Financial Protections Bureau (CFPB) to launch a probe into the charges that banks are using to make money off of unassuming customers when they withdraw money from out-of-network ATM terminals.
At his Monday press conference, he sounded like a frequent bank customer wanting their money back after he went out to breakfast.
“If you ask any consumer, they’re going to tell you it adds up,” said Senator Charles Schumer.
Senator Schumer also read off a report, created by bankrate.com , that said ATM fees have increased over 20% the last five years, continuing an upward trend of the past decade. According to Chuck’s report, at an average of $5.03 — and as high as $8 — New Yorkers are now paying the second-highest ATM fees in the nation behind Atlanta.
It is amazing how many banking consumers accept it without much of a fight. Many do not realize how expensive it is to withdraw money at a foreign ATM until they go have lunch.
What is a foreign ATM?
In short, they are “out-of-network” ATM transactions. Foreign ATM withdrawals usually incur two different charges — the foreign ATM fee and the out-of-network fee.
At Chase Bank, the rules of the cost of withdrawal at a foreign ATM machine is $5 per transaction: $2.50 to the bank and $2,50 to pay for any fee charged by the foreign ATM operator when you withdraw cash.
The average cost of foreign ATM fees at the 10 biggest banks in America was $4 — that’s 30 cents more from last year’s average of $3.70. Currently, the highest foreign withdrawal fee is $5. On the other hand, Capital One is only charging customers $2 — which is the lowest fee charged by a bank for this type of transaction.
At Citibank, U.S. Bank, Capital One and TD Bank, the cost of withdrawing money at an out-of-network ATM can cost just as much as a foreign ATM withdrawal. In general, banks charge about double for foreign ATM transactions versus out-of-network ATMs.
As an 18 year income tax and financial professional, I know many clients who EASILY spend $1,000 annually on ATM fees. At $8 per ATM transaction that’s approximately 125 transactions a year.
If you would have saved that $1,000 for 10 years at 3% compound interest, at the same local bank, the interest earned would be $349.83 (3.045%). So, for every $1000 you deposit at your bank, your money earns $35 annually.
Now, if you’re the average New Yorker making $40,000 and paying $1000 in ATM charges, you are losing 2.5% of your income per year.
We believe banks want you to “go to lunch and spend money.” However, don’t use foreign ATMs. Because, if you do, each time you spend $5 for lunch, it is literally costing you $12.72. Your bank makes $7.72 [ATM fees ($8.00) minus the reported interest ($0.28) on your money].
So far it’s perfectly legal! It’s about time our Federal officials investigated this national disgrace. We can barely afford a hamburger these days–but now we know why bank executives can eat steak.
Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating their 18th year as a fee only financial planning firm specializing in solving one’s financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.
For financial inquires or assistance, Anthony can be reached at (347) 575-5045 or advisorsgroup@ymail.com.
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