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What are ATM surcharges?

Automated teller machine (ATM) surcharges are additional fees imposed on consumers who use ATMs to withdraw cash. Unlike other ATM fees, surcharges are imposed imposed directly at the machine.

Banks usually impose ATM surcharges only on customers of other banks, though some ATM owners impose surcharges on everyone. Not all ATMs have surcharges -- in fact, surcharges were rare until 1996 -- but it's getting harder and harder to find surcharge-free ATMs.

For example, suppose you have a checking account at Community Bank, and you want to withdraw $20 using an ATM owned by First Megabank. Community Bank is probably going to charge you a fee for using a nonproprietary or "foreign" ATM (sometimes called an "off-us" fee); you'll see that fee on your next monthly statement. (Your bank may not charge you a fee directly, but you're probably going to pay in one way or another -- perhaps by maintaining a high minimum balance or paying a monthly service charge.)

Why does your own bank charge you for using someone else's ATM?Because it has to pay an "interchange fee" -- typically about fifty cents -- to the ATM owner, to cover its costs of providing and maintaining the ATM. (There's also a separate, smaller fee that goes to the ATM network.) The interchange fee is designed to cover the costs of operating the ATM, but it's only an estimate, so low-volume ATMs may end up losing money, while high-volume ATMs can turn a large profit, even without surcharges.

 
Now, here's where the surcharge comes in: Many ATM owners (banks and, increasingly, other businesses) have begun to collect additional fees on top of the withdrawal amount. These surcharges are usually $1 to $2, but they can be as high as $7 to $10; there isn't currently any legal limit in most states. The ATM networks prohibited surcharges entirely in most states until 1996, but many banks (particularly large banks) have begun surcharging since then.

If First Megabank -- the ATM owner in this example -- imposes a $1.50 surcharge, then your $20 withdrawal will appear on your receipt as $21.50, even though all you get is $20. And, of course, any fee that your own bank charges (to recover the interchange fee that it pays to First Megabank) will show up on your next monthly statement. You could easily end up paying over 10% of the amount that you withdrew in fees!

 
In effect, ATM surcharging results in the ATM owner receiving two separate fees for the same transaction. That's why the practice has been labelled "double dipping" by consumer advocates.