We’ve all seen the message before: “An additional service fee of $2 will be charged in order to process this transaction. Do you still want to continue with your withdraw?” It’s annoying, but who cares about a measly $2 when the machine is so convenient! If only that were the case, I would agree. However, the next time you make that withdrawal from a non-branch ATM, make a note of the date and time, and take a look for it on your next bank-statement. Most people won’t see anything at all, which is a good thing.
If you’re one of the unfortunate few that didn’t realize it’s time to upgrade to a better savings account, you might actually notice that your bank is charging you an additional service fee on that transaction above that $2 you already paid! Think about it, there are some accounts that are charging you $4 every time you withdraw grocery money from a non-branch ATM, and you’ll only be explicitly be made aware of half of that amount at the time of the withdraw! Why in the world are those sneaky banks getting away with this? There are a couple of reasons.
ATM networks are a complicated beast. There are many different network providers, banks, and service processors that all need to interface together to make the transactions possible. Here in the USA, the sheer volume of data that gets juggled through these networks is mind-boggling, which makes the process expensive for the banks to run. Here’s how it generally works: Firstly, the owner of the ATM (ie. The store owner) is the one that benefits from that initial $2 transaction fee that you’re warned about. That’s the price of convenience.
The machine owner then pays a service company to manage the network transactions that allow the withdrawal transactions to take place. Depending on the situation, the service company will also have some kind of relationship established with the banks, so that they can transfer funds to the machines. The end result is sometimes that the banks wind up paying the service providers a small fee to handle the transactions. While this fee is negligible in the face of the value that the service creates for customers, it’s important to recognize that banks sometimes lose money on the transactions if the transaction belongs to a savings account that isn’t really generating revenue for the bank as a company. The solution? Charge for transactions to cover the costs.
It’s not all bad news though. If you’re being charged transaction fees on non-branch withdrawals, it might be that your bank is trying to incentivise you to upgrade your account. This provides you with a couple of benefits, but the biggest one is always more savings for you. If you’re saving $2 a month on transaction fees, and now getting all of the perks associated with an upgraded account (which will save you more money), you’re coming out ahead of the game, and becoming a more valuable customer for that bank (which means they’ll go further out of their way to help you in the future).
Again, the chances of you being one of these unfortunate customers is small, but the scenario serves as a reminder to keep track of your monthly statements, and to know what it is your getting billed for. If you’re worried, check out our section on bank savings rates, and you can compare some of the basic features of general savings amounts to see if there’s a program that’s better suited for you.
