United States General Accounting Office

GAO Testimony

Before the Committee on Banking, Housing, and Urban

Affairs, U. S. Senate

For Release on Delivery

Expected at

10:00 a.m., EDT

on Wednesday

July 15, 1998

AUTOMATED TELLER

MACHINES

Survey Results Indicate

Banks’ Surcharge Fees Have

Increased

Statement of Susan S. Westin

Associate Director, Financial Institutions and Markets

 Issues

General Government Division

GAO/T-GGD-98-171

Summary 

Automated Teller Machines: Survey Results

Indicate Banks’ Surcharge Fees Have

Increased

GAO’s testimony, based on its April 1998 report,1 discusses information on

automated teller machine (ATM) deployment and surcharge fees assessed

by banks and thrifts (hereinafter referred to as banks). ATM surcharge fees

are assessed by some banks on noncustomers—individuals who do not

hold an account at their institution.

GAO conducted a statistically representative survey of about 500 randomly

selected banks throughout the United States. All of the estimates are based

on responses to this survey, which had a response rate of 90 percent. GAO

did not include credit unions or nondepository institution (nonbank) ATM

operators in its survey. However, GAO did collect similar fee information on

ATMs owned by selected nonbanks.

GAO’s survey results indicated that approximately the same percentage of

banks in the United States operated ATMs as of February 1, 1998, as

operated them as of February 1, 1997—just over 70 percent. However,

during this 1-year period the number of ATMs that banks operated

increased about 13 percent, to an estimated 132,000. About 66 percent of

this growth was in ATMs located off bank premises. Survey results also

indicated that, for the month of January, the average number of customer

withdrawal transactions per ATM declined 15 percent from 1997 to 1998,

while the average number of noncustomer withdrawal transactions per

ATM declined 24 percent during this period.

According to GAO’s survey results, the percentage of banks operating ATMs

that assessed surcharges increased from 39 percent as of February 1, 1997,

to 64 percent as of February 1, 1998. Also, the estimated number of ATMs

with surcharges increased by more than 50 percent during the same

period. Estimates indicated that the average surcharge fee assessed by

banks, including in the calculation the ATMs without surcharges, increased

from $0.69 as of February 1, 1997, to $1.00 as of February 1, 1998.

Additionally, the estimated average surcharge fee, excluding ATMs that did

not surcharge, increased from $1.17 to $1.27 during this period. For these

ATMs, the most typical fee as of February 1, 1998, was $1.50, compared to

$1.00 the previous year.

1

Automated Teller Machines: Survey Results Indicate Banks’ Surcharge Fees Have Increased

(GAO/GGD-98-101, Apr. 24, 1998).

Page 1 GAO/T-GGD-98-171
Statement 

Automated Teller Machines: Survey Results

Indicate Banks’ Surcharge Fees Have

Increased

Mr. Chairman and Members of the Committee:

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

automated teller machine (ATM) deployment and surcharge fees assessed

by banks and thrifts.2

 In this testimony I refer to both types of institutions

as banks. As you requested, we updated our May 1997 report3

 on ATM fees

assessed by banks on noncustomers—individuals who do not hold an

account at their institution. Such fees are called surcharge or access fees.

We estimated that the percentage of ATMs with surcharge fees increased

from 59 percent as of February 1, 1997, to 79 percent as of February 1,

1998. In addition, the average surcharge fee calculated for all ATMs

operated by banks increased from $0.69 to $1.00 over the same period. The

most typical fee as of February 1, 1998, was $1.50, compared to $1.00 the

previous year.

You asked us to summarize our survey data on changes over the past year

in (1) ATM deployment by banks in the United States and (2) the number of

banks that surcharge noncustomers and the amounts surcharged. We also

collected similar information on ATMs owned by selected nondepository

institutions (nonbanks).

To address our objectives, we conducted a statistically representative

survey of about 500 randomly selected banks throughout the United

States. All of our estimates are based on responses to this survey, which

had a response rate of 90 percent. In an effort to obtain more precise

estimates than we were able to include in our 1997 report, we expanded

our sample from about 250 banks to about 500 banks. We collected

information from all the banks responding in this year’s sample as of

February 1, 1998. We also collected February 1, 1997, information from the

banks we surveyed this year and used it to revise our 1997 estimates,

taking advantage of the larger sample to provide more precise estimates.

All estimates are subject to sampling errors, which we reported if the

errors were greater than plus or minus 10 percent. In addition, reported

changes in estimates from 1997 to 1998 are statistically significant unless

otherwise noted. We did not include credit unions or nonbank ATM

operators in our survey.

2

The detailed results are presented in Automated Teller Machines: Survey Results Indicate Banks’

Surcharge Fees Have Increased (GAO/GGD-98-101, Apr. 24, 1998).

3

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

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

Page 2 GAO/T-GGD-98-171
Statement 

Automated Teller Machines: Survey Results

Indicate Banks’ Surcharge Fees Have

Increased

Regional, national, and/or international ATM networks link ATMs and

computer systems, allowing the customers of one network member to

access their accounts through other network members’ ATMs. Until

April 1996, the two primary national networks banned the practice of

surcharging noncustomers for the use of their networks’ ATMs. However,

the bans could not be implemented in 15 states that statutorily prohibited

ATM networks from enforcing them. With other states considering similar

prohibitions, the two primary networks lifted their bans in April 1996.

Since then, some ATM operators in states where surcharges were formerly

banned by the networks have begun assessing surcharges.

ATM operators assess surcharge fees on the user’s bank; the bank in turn

pays the fees and then assesses them directly on the user. The national

networks require that, if the surcharge fee is assessed on the user, the fee

appear on the receipt at the cash machine as well as on the user’s bank

statement.

In addition to surcharge fees, switching and interchange fees are charged

for ATM use. A switching fee is assessed by the ATM network on 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. Banks may absorb this fee or pass it on to the ATM user. An

interchange fee may be assessed by ATM operators on a nonaccount

holder’s home bank for handling a transaction. If the home bank passes

this fee on to the ATM user, the Federal Reserve’s Regulation E requires the

user’s home bank to inform the user that the assessment will appear on

the user’s bank statement.

ATM Deployment by

Banks

According to our survey results, just over 70 percent of banks in the

United States operated ATMs as of both February 1, 1998, and February 1,

1997. We estimated that approximately 8,010 of 10,960 banks active at the

time of our survey operated ATMs as of February 1, 1998; and

approximately 8,210 of 11,110 banks operated ATMs as of February 1, 1997.

Banks operated an estimated 132,0004 ATMs in the United States as of

February 1, 1998, a 13 percent increase over the estimated 117,0005 ATMs

4

Sampling error is plus or minus 12 percent.

5

Sampling error is plus or minus 11 percent.

Page 3 GAO/T-GGD-98-171
Statement 

Automated Teller Machines: Survey Results

Indicate Banks’ Surcharge Fees Have

Increased

they operated as of February 1, 1997.6 About 66 percent of this growth was

in ATMs located off bank premises. Additionally, large banks operated more

ATMs than either medium or smaller banks as of February 1, 1998.7 The

percentages of ATMs operated by large, medium, and smaller banks as of

February 1, 1997, and February 1, 1998, are presented in appendix I.

According to our survey results, for those large banks that operated ATMs,

the median8

 number of ATMs operated increased by about 100 from

February 1, 1997, to February 1, 1998—from 345 to 440. The median

number of ATMs operated by medium and smaller banks was 43 and 3,

respectively as of February 1, 1998—approximately the same median

number as they operated the previous year.

Our survey results also indicated that, for the month of January, the

average number of customer withdrawal transactions per ATM declined

15 percent from 1997 to 1998, while the average number of noncustomer

withdrawal transactions per ATM declined 24 percent during this period.

More Banks Assessed

Surcharges and Fees

Increased

Our survey results indicated both that a greater percentage of banks

assessed surcharges as of February 1, 1998, than did a year before and that

the number of ATMs with surcharges increased. Almost 64 percent of banks

that operated ATMs as of February 1, 1998, assessed surcharges on at least

some of their ATMs, while about 39 percent of the banks that operated ATMs

as of February 1, 1997, imposed surcharges. Additionally, the number of

ATMs with surcharge fees increased by more than 50 percent—from about

69,1009

 to about 104,10010 ATMs during this period. This represents an

increase from 59 percent to 79 percent of ATMs. The increase included

newly deployed or acquired ATMs, as well as existing ATMs that previously

did not have a surcharge fee.

6

Point estimates are subject to a sampling error that differs from the sampling error on our estimates

of the change between 1997 and 1998. Although the confidence intervals on the point estimates may

overlap, the estimate of the change between the 2 years is statistically significant.

7

We categorized banks as large, medium, and smaller and defined these categories as banks with

assets of over $10 billion, $1 billion to $10 billion, and less than $1 billion, respectively.

8

The median is the middle observation—that is, half the observations lie above this value and half lie

below it.

9

Sampling error is plus or minus 15 percent.

10Sampling error is plus or minus 15 percent.

Page 4 GAO/T-GGD-98-171
Statement 

Automated Teller Machines: Survey Results

Indicate Banks’ Surcharge Fees Have

Increased

According to our 1998 survey results, the average ATM surcharge fee has

also increased since February 1, 1997.11 Our estimates indicated that the

average surcharge fee assessed by banks, including in our calculations the

ATMs without surcharges, increased from $0.69 as of February 1, 1997, to

$1.00 as of February 1, 1998.12 The average surcharge fee as of December

31, 1995, was $0.17.13 This was before the two primary national networks

lifted their ban on surcharge fees. In addition to the previously discussed

average fees, the estimated average surcharge fee assessed by banks,

excluding ATMs that did not surcharge, increased from $1.17 as of

February 1, 1997, to $1.27 as of February 1, 1998. The maximum ATM fee

reported by banks in our sample as of both dates was $3.00.

Our survey results also indicated that for the ATMs with surcharges, the

most typical fee as of February 1, 1998, was $1.50 compared to $1.00 for

the previous year. Additionally, these results indicated that the number of

ATMs with surcharge fees of $1.50 or more had increased since 1997.

Specifically, an estimated 21 percent of ATMs had fees of $1.50 or more as

of February 1, 1997, and an estimated 40 percent of ATMs had such fees as

of February 1, 1998. Appendix II provides more specific data on the

percentages of banks that assessed surcharge fees, average surcharge fees,

and the percentage of ATMs with various surcharge fees.

Selected Nonbanks

Also Increased Fees

Consistent with the results of our bank survey, the seven large nonbanks

that provided us information generally reported increases in the number of

ATMs owned, the number of ATMs with access fees, and the average access

fee.14 Specifically, these nonbanks reported an 11 percent increase in the

number of ATMs they owned—from 9,223 ATMs to 10,277 ATMs—between

February 1, 1997, and February 1, 1998. During the same period, the 7

nonbanks reported a 61 percent increase—from 5,056 to 8,120—in the

number of ATMs they owned that charged users an access fee. The average

fee, including in our calculations the ATMs without access fees, increased

from $0.48 on February 1, 1997, to $0.81 on February 1, 1998. The average

11We calculated average surcharge fees on a per ATM basis rather than on a per bank basis.

12Actual surcharge fees tend to occur in 50-cent increments (e.g., $1.00, $1.50, and $2.00). 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.

13Sampling error exceeds plus or minus 10 percent.

14When referring to nonbanks, we use the generic term access fee rather than surcharge fee. Surcharge

fees refer to the access fees that banks charge individuals who do not hold an account at their

institution. However, nonbanks do not have deposit account holders.

Page 5 GAO/T-GGD-98-171
Statement 

Automated Teller Machines: Survey Results

Indicate Banks’ Surcharge Fees Have

Increased

fee, excluding ATMs that did not charge a fee, increased from $0.87 to $1.03

over the same period. The maximum access fee reported by these

nonbanks was $8.00.

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

questions you or other members of the Committee may have.

Page 6 GAO/T-GGD-98-171
Page 7 GAO/T-GGD-98-171
Appendix I 

ATM Deployment

Figure I.1: Percentages of ATMs Operated by Large, Medium, and Smaller Banks as of February 1, 1997, and February 1,

1998

1997

Large

(76 banks)

Medium

(414 banks)

Smaller

(7,721 banks)

37%

31%

32%

1998

Large

(72 banks)

Medium

(334 banks)

Smaller

(7,600 banks)

31%

49%

19%

Note: Percentages may not add to 100 due to rounding.

Source: GAO analysis of survey results.

Page 8 GAO/T-GGD-98-171
Appendix II 

ATM Surcharge Fees

Figure II.1: Percentages of Large,

Medium, and Smaller Banks That

Assessed Surcharges on at Least

Some of Their ATMs as of February 1,

1997, and February 1, 1998

0

20

40

60

80

100

38

54

58

39

63

73

83

64

Percentage of banks that surcharged

Smaller Medium Large All banks

1997

1998

Size of banks

a

a

aSampling error is plus or minus 11 percent.

Source: GAO analysis of survey results.

Page 9 GAO/T-GGD-98-171
Appendix II 

ATM Surcharge Fees

Figure II.2: Average ATM Surcharge

Fees Assessed by Large, Medium, and

Smaller Banks, Including ATMs

Without Surcharges, as of December

31, 1995; February 1, 1997; and

February 1, 1998

0

0.2

0.4

0.6

0.8

1

1.2

Average ATM surcharge fees (dollars)

Smaller Medium Large All banks

1997

1998

1995

Size of banks

0.12

0.64

0.85

0.23

0.73

0.92

0.16

0.70

1.12

0.17

0.69

1.00

Note 1: We collected December 1995 data during our 1997 survey. We did not collect additional

1995 data during our 1998 survey. December 1995 estimates were based on the responses of

banks we surveyed in February 1997.

Note 2: Although some of the sampling errors for the data for smaller, medium, and large banks

were greater than plus or minus 10 percent, all of the differences between the 1995 and 1997

data within the three size groups were statistically significant, and the differences for the smaller

and large banks between 1997 and 1998 were also statistically significant.

Note 3: The average ATM surcharge fees were calculated for all ATMs, including those that did

not surcharge.

Source: GAO analysis of survey results.

Page 10 GAO/T-GGD-98-171
Appendix II 

ATM Surcharge Fees

Figure II.3: Average ATM Surcharge

Fees Assessed by Banks, Excluding

ATMs Without Surcharges, as of

December 31, 1995; February 1, 1997;

and February 1, 1998

0

0.25

0.5

0.75

1

1.25

1.5

0.99

1.17

1.27

Average ATM surcharge fees (dollars)

1995 1997 1998

a

aSampling errors is plus or minus 12 percent.

Note 1: We collected December 1995 data during our 1997 survey. We did not collect additional

1995 data during our 1998 survey. December 1995 estimates were based on the responses of

banks we surveyed in February 1997.

Note 2: The average ATM surcharge fees were calculated for only those ATMs with surcharges.

Source: GAO analysis of survey results.

Page 11 GAO/T-GGD-98-171
Appendix II 

ATM Surcharge Fees

Figure II.4: Percentages of ATMs With

Various Surcharges as of February 1,

1997, and February 1, 1998 Percentage of ATMs with various surcharges

0

10

20

30

40

50

$0.00 $.50 $1.00 $1.50 $2.00

Surcharge amount

1997

1998

Othera

41

21

3

<1

34 34

39

20

11 1

4

aIncludes all other fee levels combined.

Source: GAO analysis of survey results.

(233564) Page 12 GAO/T-GGD-98-171
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100