ATM Fees: Does Bank Size Matter?

and Richard Kopcke provided helpful comments. The data used in the study were made available by Bank Rate Monitor. Joshua Congdon-Martin and Marie Willard supplied excellent research assistance. The debate on automated teller machine (ATM) fees heated up recently, when voters in San Francisco and Santa Monica approved bans on banks' charging non-customers for using their ATMs. A federal court ruling has temporarily barred the two California cities from enforcing the bans, however. Connecticut and Iowa used existing laws to ban such ATM fees, but the Connecticut Supreme Court rejected the ban in that state. The Pentagon has said it would consider a ban on ATM fees on U.S. military bases. So far, the Congress has rejected legislation that would eliminate non-customer ATM fees nationwide. ATM networks have allowed banks to charge non-customers for withdrawing money from their ATMs since 1996, but ATM fees have been criticized repeatedly by consumer advocates and politicians and the California bans may soon be copied in New York and elsewhere. Large banks 1 have been especially targeted, because they are more likely to impose the fees and their fees tend to be higher than those charged by small institutions. Critics of ATM fees call large banks greedy. Supporters argue that the fees represent the cost of convenience, and that consumers are willing to pay for being able to withdraw money anywhere, and not just at their own institutions. Large banks' ATMs are more convenient, because they allow access to cash at more locations. Surveys comparing ATM fees across financial institutions have shown that large banks' fees exceed those charged by small banks (most surveys do not control for differences in quality among banks of various sizes. ATM fees are prices charged for a service—typically a cash withdrawal. The more machines a bank has, the more convenient it is for cardholders to withdraw cash. This article analyzes differences in ATM fees among banks in order to test whether large banks impose higher ATM fees than do small banks, controlling for some quality and cost differences associated with more ATMs.