I just saw on a CNN news ticker that some bank ATMS (ticker didn’t specify) are going to begin offering $1.00 and $5.00 withdrawal options.
At first glance, you may think “it is about darn time!” Sometimes you just don’t need $20. I can even see the benefit from a safety issue – less money withdrawn, less of a target. Finally, you may not have $20.00 in the bank, but are in desperate need of cash –in-hand for a myriad of reasons. All of these rationales and many others are logical. But BE WARY OF CONVENIENCE!
An article on www.Bankrate.com referenced the total amount Banks made in 2010 from ATM Fees. The results: $7 Billion! (source: http://www.bankrate.com/financing/banking/lack-of-atm-fee-awareness/)
Side note: Interestingly enough, only 9% of the 1,000+ respondents knew that figure as well.
In August of 2012 CNN Money released an article that stated: “The fee banks charge non-customers for using their ATMS had edged up from $2.37 to $2.40, while the fee banks charge their customers for using out-of-network ATMs has climbed from $1.10 to $1.28.” (source: http://money.cnn.com/2012/08/13/pf/bank-fees-rise/index.html)
So what does this mean to you, the prudent fee-adverse consumer?
ATMS allow withdrawals in $20.00 increments & say charge a $2.50 fee to withdraw money from them if you are using a competitors ATM. Let’s do the math:
- $20.00 Withdrawal + $2.50 Fee = $22.50, that’s a 12.5% (INSTANT) interest charge to withdraw YOUR MONEY.
- 10.00 Withdrawal + $2.50 Fee = $12.50, 25% (INSTANT) interest charge to withdraw YOUR MONEY.
- $5.00 Withdrawal + $2.50 Fee – $7.50, 50% (INSTANT) interest charge to withdraw YOUR MONEY
- (I don’t think I need to calculate the interest on a $1.00 – You get the point)
More Comparisons v. $5.00 Withdrawal Fee (50%)
- WSJ Prime Rate: 3.25%
- Avg consumer Credit Card rate: 16.80% (source: http://www.indexcreditcards.com/credit-card-rates-monitor/)
- Brm National Index (mortgage rates): 3.58% (source: http://www.bankrate.com/brm/news/mtg/top10_averages.asp)
- RETURN (interest earned) on Certificates of Deposit: 1.050% with a $5,000 deposit (source: http://www.bankrate.com/cd.aspx)
- RETURN on Financial Investments: 6-8% (source: http://www.forbes.com/sites/financialfinesse/2012/06/20/why-your-investment-returns-could-be-lower-than-you-think/)
I listed all of these examples in order to make one point: Use the ATM, BUT use it wisely!
You may be paying out in interest more than what financial/investment accounts are earning on an annual basis!!!
Here are some tips to keep a little more dough in your pocket:
- Withdraw a larger amount. (in the case you NEED to use an ATM)
- Plan ahead. If you may need cash in hand in smaller increments, go to your bank for a withdrawal at the window.
- Find a bank that does not charge an ATM fee for using out-of –network ATMs and reimburses you the “service fee” charged by competitor ATMS.
*Banks do not charge “interest” to withdraw your money. They charge a flat fee that can be up to $5.00 or more depending on the Bank. I converted the fee to a percentage to make it easier to compare Apples-to-Apples (and hopefully make a bigger impression).