United States General Accounting Office

GAO Testimony

Before the Senate Banking Committee

For Release on Delivery

Expected at

10:00 a.m., EDT

on Wednesday

June 11, 1997

AUTOMATED TELLER

MACHINES

Banks Reported That Use of

Surcharge Fees Has

Increased

Statement of Thomas J. McCool

Associate Director, Financial Institutions and Markets

Issues

General Government Division

GAO/T-GGD-97-123

Summary 

Automated Teller Machines: Banks Reported

That Use of Surcharge Fees Has Increased

GAO’s testimony, based on its recently issued report,1 discusses

information on the practice of surcharging by banks and thrifts with

regard to automated teller machines (ATMs) used by individuals who do

not hold accounts at the institutions owning the ATMs. Banks have access

to ATM networks that link their respective ATM and computer systems so

that depositors from any member of the network can access their

respective accounts through any network bank’s ATM. There are fees

associated with using ATMs. One type of fee is the surcharge fee that ATM

owners may charge ATM users who do not have accounts with them. In

assessing these fees, ATM owners generally charge users’ banks, which pay

the fees and then charge them directly to the users’ accounts.

GAO conducted a projectable survey of 246 randomly selected banks

throughout the United States to determine the number of banks that

operate ATMs, the number of these banks that surcharge non-account

holders, and the amounts of surcharges that are assessed.

GAO estimated that, as of February 1, 1997, about three-fourths of all banks

in the United States operated ATMs. As of that date banks operated about

119,000 ATMs, an increase of 34 percent over the 89,000 ATMs operated at

the end of 1995.

About one-third of the banks that operated ATMs reported that they

imposed surcharges on non-account holders who used their machines.

More of the large banks than smaller banks reported surcharging, and a

greater percentage of the large banks reported that they began surcharging

during the past year.

Actual surcharge fees tend to occur in 50-cent increments—e.g., $1.00,

$1.50, $2.00. GAO estimated that the average surcharge fee for all ATMs

operated by banks, including those with no surcharge fees, had more than

tripled since the end of 1995, from $0.17 to $0.62 in 1997. The average

reported surcharge fee for those ATMs with surcharges was $1.14 in 1997;

the most commonly reported actual surcharge fee was $1.00.

1

Automated Teller Machines: Banks Reported That Use of Surcharge Fees Has Increased

(GAO/GGD-97-90, May 16, 1997).

Page 1 GAO/T-GGD-97-123
Statement 

Automated Teller Machines: Banks Reported

That Use of Surcharge Fees Has Increased

Mr. Chairman and Members of the Committee:

We are pleased to be here today to discuss the results of our study on the

use of surcharge fees for automated teller machines (ATMs).1

 As you

requested, we gathered information on fee-charging practices of banks and

thrifts with regard to ATMs used by individuals who do not hold accounts at

the institutions owning the ATMs. Such a fee is called a surcharge or access

fee. We estimate that in the 13-month period from December 31, 1995, to

February 1, 1997, there was a 320-percent increase in the number of ATMs

that had surcharge fees. In addition, the average surcharge fee calculated

for all ATMs operated by banks and thrifts more than tripled over this same

time period.

You asked us to summarize the information in our study relating to (1) the

number of banks that operate ATMs, and (2) the number of these banks that

surcharge non-account holders and the amounts of surcharges that are

assessed. Our study did not attempt to determine the effect surcharge fees

have on the deployment of new ATMs. Further, it was not intended to

address whether ATM operators are adequately disclosing information on

ATM fees to customers.

To address these objectives, we conducted a survey of 246 randomly

selected banks throughout the United States. We sent a questionnaire to

the selected banks to obtain information on ATMs they operated and

surcharge fees assessed non-account holders using these ATMs as of

December 31, 1995, and February 1, 1997. We selected those dates to

obtain data before and after the two primary national ATM networks

changed their policy in April 1996 from prohibiting surcharges to allowing

their members to assess surcharges. The response rate for our survey was

87 percent.

The sample size and composition were determined by the need to obtain a

high response rate, as well as by time constraints. To obtain as much

information as possible about ATMs and surcharges, we sampled large

banks at a higher rate than other banks, because large banks, on average,

operate more ATMs. Consequently, the estimates for large banks were more

precise—i.e., the estimates have smaller sampling errors. We reported all

sampling errors greater than ±10 percent.

1

The detailed results are presented in Automated Teller Machines: Banks Reported That Use of

Surcharge Fees Has Increased (GAO/GGD-97-90, May 1997).

Page 2 GAO/T-GGD-97-123
Statement 

Automated Teller Machines: Banks

Reported That Use of Surcharge Fees Has

Increased

Studies done by financial industry groups report that ATMs can perform

many of the tasks bank tellers perform. For example, consumers use ATMs

to make cash withdrawals from personal checking, savings, and other

deposit accounts, as well to make deposits and to move money between

accounts and ATMs are typically available 24 hours a day.

Banks have access to ATM networks that link their ATMs and computer

systems so that depositors from any member of the network can access

their accounts through any network bank’s ATM. There are regional,

national, and international networks. These networks enable ATM users to

obtain ATM services over a much wider geographic area than that covered

by their own bank’s offices or ATMs.

There are fees associated with using ATMs. The fees may or may not be

directly passed to the ATM user. Banks may charge their own account

holders for using their ATMs; however, most of the fees are associated with

consumers using ATMs operated by other banks in the network system. A

switching fee is assessed by the ATM network to the user’s home bank to

pay for processing each of its network transactions and to defray other

network operating costs, such as advertising and network security. An

interchange fee may be charged by ATM owners to a non-account holder’s

home bank for handling one of its transactions. Finally, a surcharge fee

may be charged by ATM owners to ATM users who do not have accounts

with them. In practice, ATM owners may surcharge the users’ banks, and

the banks in turn pay the fees and then may charge them directly to the

users’ accounts. In our study, we gathered information on surcharge fees

only.

Most Banks Reported

Operating ATMs

From our analysis of the survey responses, we estimate that, as of

February 1, 1997, about 75 percent (±14 percent sampling error) of banks

in the United States operated ATMs. Of the estimated 8,600 (±1,700) banks

that reported operating ATMs as of February 1, about 8,000 (±1,800) had

ATMs as of December 31, 1995. In addition, we estimate that, as of

February 1, 1997, banks operated about 119,000 ATMs, a statistically

significant increase from the estimated 89,000 ATMs they operated at the

end of 1995.

Although large banks—those with assets over $10 billion—accounted for

about 1 percent of the total number of banks that reported operating ATMs,

they operated 37 percent of the total number of ATMs in the United States.

The percentages of ATMs operated by large, medium, and smaller banks are

Page 3 GAO/T-GGD-97-123
Statement 

Automated Teller Machines: Banks

Reported That Use of Surcharge Fees Has

Increased

indicated in appendix I. For banks that operate ATMs, the large banks

reported a median of 346 ATMs in operation, compared with 2 for the

smaller banks. About 98 percent of the large banks had 26 or more ATMs in

operation.

Our survey results show that for smaller banks—those having assets of

less than $1 billion—75 percent (± 15 percent) had at least one ATM as of

February 1, 1997. Banking officials’ responses indicated that between the

end of 1995 and February 1, 1997, more smaller banks began operating

ATMs at both on- and off-premise locations, rather than at only on-premise

locations. Off-premise locations include entertainment and transportation

facilities and retail outlets. We found that about 95 percent of the large

banks continued to operate ATMs both on- and off-premises.

Banks Reported Use

of Surcharge Fees Has

Increased

About one-third—2,900 (±1,400) of 8,600—of the banks that operated ATMs

reported that they imposed surcharges on non-account holders who used

their machines.2

 As of February 1, 1997, 57 percent of large banks reported

surcharging, an increase from the 20 percent that were doing so in 1995.

Thirty-two percent (±16 percent) of the smaller banks were surcharging in

1997, while 20 percent (±14 percent) of these banks imposed a surcharge

in 1995.

The reported number of ATMs with surcharge fees has also increased since

1995. Our survey showed that from the end of 1995 to February 1, 1997,

there was an almost 320-percent increase in the number of ATMs with

surcharge fees—from about 15,400 (±6,500) to about 64,400 (±16,700). This

increase included newly deployed or acquired ATMs as well as old ATMs that

previously did not have a surcharge fee. Banks indicated that both

on-premise and off-premise ATM surcharging had increased since 1995.

Actual surcharge fees tend to occur in 50-cent increments—e.g., $1.00,

$1.50, $2.00. The most typical surcharge reported to us was $1.00.

However, a commonly used measure of surcharge fees throughout the

industry is a simple average. We calculated the average surcharge fee in

two ways: for all ATMs, including those with no surcharge fees, and for only

those ATMs with surcharges. We estimated that the average surcharge fee

for all ATMs operated by banks, including those with no surcharge fees, had

more than tripled since the end of 1995, from $0.17 (±$0.08) to $0.62

(±$0.10) in 1997. The average reported surcharge fee for those ATMs with

2

While about one-third of banks reported surcharge fees, these fees were charged for the use of about

54 percent of the ATMs in service as of February 1, 1997.

Page 4 GAO/T-GGD-97-123
Statement 

Automated Teller Machines: Banks

Reported That Use of Surcharge Fees Has

Increased

surcharges was $1.14 (± $0.06) in 1997. Appendix II provides the average

surcharge fees by bank size, and shows that the number of ATMs that have

surcharge fees of $1.00 or more has increased since 1995.

This concludes my prepared statement. I will be happy to respond to any

questions you or other members of the Committee may have.

Page 5 GAO/T-GGD-97-123
Appendix I 

Percentages of All ATMs in Operation

Reported by Large, Medium, and Smaller

Banks, 1997

37% • Large (>$10 billion in assets) - 77

banks

31%•

Medium ($1-$10 billion in assets) -

413 banks

•32%

Smaller (<$1 billion in assets) -

8,141 banks

Source: GAO analysis of survey results.

Page 6 GAO/T-GGD-97-123
Appendix II 

ATM Surcharge Fees

Figure II.1: Average ATM Surcharge

Fees Reported by Large, Medium, and

Smaller Banks, 1995 and 1997

Average surcharge fee (in dollars)

0

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Smaller Medium Large

Size of Banks

0.12

0.48

0.23

0.65

0.16

0.71

December 1995

February 1997

Note 1: The average ATM surcharge fees were calculated for all ATMs, including those which

have no surcharges.

Note 2: Although some of the sampling errors were much greater than ±10 percent, all of the

differences within the three size groups were statistically significant.

Source: GAO analysis of survey results.

Page 7 GAO/T-GGD-97-123
Appendix II 

ATM Surcharge Fees

Figure II.2: ATM Surcharges Reported

by Banks, 1995 and 1997 Percent of ATMs

0

10

20

30

40

50

60

70

80

90

$0.00 $0.00-$0.99 $1.00 $1.01-$1.99 $2.00 or more

Amount of surcharge

83

46

3 3

13

33

1

16

1 1

December 1995

February 1997

Source: GAO analysis of survey results.

(233536) Page 8 GAO/T-GGD-97-123
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