- The Washington Times - Sunday, November 14, 2004

Citibank has become the first large bank in the Washington area to stop charging all of its customers fees for using ATMs of a nationwide group of financial institutions and merchants.

The New York-based bank joined an alliance with the MoneyPass ATM Network that links more than 8,250 of the machines nationwide, all of which can be used free of surcharge to Citibank customers at participating banks, grocery stores, restaurants, retail outlets and other businesses.

“The program is designed to provide additional access and convenience for our customers, especially in areas where we do not have large numbers of proprietary [automated teller machines],” said Wayne Malone, Citibanking North America’s distribution and deposit products director. “We consider the program to be a cost-effective investment aimed at enhancing customer service.”

Citibank charges customers $1.50 each time they use the ATMs of financial institutions outside the MoneyPass ATM Network. The bank operates 2,900 of its own ATMs and is adding more of them.

Citigroup, parent company of Citibank and the world’s largest financial institution, is joining a growing number of banks trying to win customers by waiving fees for transactions at ATMs.

“This is an indication of a very competitive banking environment,” said Charlotte Birch, spokeswoman for the American Bankers Association. “They’re trying to win over customers.”

About 10.8 billion transactions were conducted through ATMs in the United States last year, the group said. ATM surcharges averaged $1.32 per transaction last spring, according to Bank-Rate.com, a financial advising service. In the Washington area, the surcharges range from $1 at Columbia Bank to $2 at most other banks, such as Chevy Chase Bank, Provident Bank and Wachovia Bank.

Banks pay hefty prices to operate their ATMs.

Each machine costs between $9,000 and $50,000, depending on the kinds of functions it performs. Equipment maintenance, cash replenishment, rent and similar expenses can cost financial institutions another $12,000 to $15,000 per machine, the American Bankers Association said.

Waiving transaction fees means the banks must shift funds from elsewhere to help pay for the ATMs.

Until recently, waiving fees for use of other ATMs to attract customers was a technique used primarily by small banks.

Big banks waived the fees only for their customers with large accounts. Now, they are finding the marketing value of free ATM service is greater than their costs of operating the machines.

In March, the Bank of New York started offering checking accounts that include the benefit of no fees for using ATMs of other institutions. Customers of new Wachovia Bank branches in New York City and Texas also get free ATM transactions with other financial institutions.

“It’s a customer-acquisition strategy,” said Wachovia spokeswoman Mary Beth Navarro.

Wachovia used focus groups to determine that the convenience of waiving fees would be a good strategy for entering the new markets.

However, financial-services management firm Dove Consulting warns that other banks still can charge transaction fees, even if a customer’s own bank waives the fees. Both the customer’s bank and the other bank typically charge fees for using another bank’s ATM.

Each bank has the discretion to set its own fees.

The surcharges are disclosed on signs next to ATMs or on the computer screen before a transaction is completed.

A MoneyPass decal typically is displayed on ATMs in the nationwide network.

Dove Consulting says it is unlikely banks would raise their rates on customers of Citibank and other institutions that are dropping transaction fees.

“Is there a chance? Yes,” said Joel Stanton, Dove Consulting spokesman. “Is it likely? Probably not. I would be surprised to see anyone go to that extreme.”

Some big banks, such as Bank of America, say their ATM networks are big enough that they do not need to expand them through fee-waiver alliances with other banks.

Bank of America owns 16,500 ATMs in 29 states. It charges customers $2 for using ATMs of other financial institutions.

“Practically speaking, Bank of America customers have so many machines available to them that with a little planning, there should be little reason or need for them to use another bank’s ATM,” spokesman Steven Lubetkin said.

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