CHARLOTTE, N.C. — In move that surprised many industry analysts,Bank of America has begun raising the fee for non-depositors to usemany of its ATMs.

The bank has announced that the fee for non-depositors using itsATM machines in most major U.S. markets has gone from $2 to $3.

The fee change began on July 31 and is being phased in acrossthe nation in the coming month. The fee change will only apply toBank of America ATMs in branches rather than those placed inshopping malls, airports, convenience stores and other publiclocations, the bank said.

According to bankrate.com, an Internet site which tracks bankfee data, Bank of America last raised ATM fees two years ago from$1.50 to $2.00. In media reports bank spokespersons have justifiedthe change in light of the addition of check imaging machines andother improvements the bank has made to its ATMs.

Reactions to the news across the credit union part of the ATMindustry included optimism at seeing another clean cut opportunityto further differentiate credit unions from banks and concern thatBofA's move will continue to drive down the use of ATMsgenerally.

“On this side of the question, all I can say is that we continueto beat the stuffing out of transaction volumes,” quipped JimHanisch, executive vice president with CO-OP Financial Services,the parent CUSO of the of the credit union-owned CO-OP Network offee-free ATMs. “And this really cannot help.”

Hanisch and other industry executives, both within and withoutthe credit union industry, estimate that ATM fees generally arealready too high and that they have become a sharp disincentive forthe general public to use ATMs. It is a case of the ATM industrystrangling their own goose, they argue, because every increase inATM fee trains another segment of the public to seek out point ofsale terminals to obtain cash or just to stop using cash at all formost things.

The most recent Dove Consulting ATM study, which was sponsoredby four leading ATM industry organizations, including CO-OP,documented the trend. As of September 2006, the report found thatbetween 2004 and 2006 deployers' average number of monthlytransactions per on-premise ATM fell from 4,216 to 3,651,representing an annual decline of 7%. Similarly, per-ATMtransaction volumes for off-premise ATMs decreased at an annualrate of 8%, from 2,123 in 2004 to 1,807 in 2006.

The report also found that as per-ATM transaction levels declineand the percentage of foreign acquired transactions stagnates, thenumber of foreign acquired transactions per ATM, the number oftransactions that produce revenue for deployers in the form ofsurcharge fees and interchange fees, has been decreasing.

“This trend means that, in the absence of a surcharge-rateincrease, deployers' direct revenues per ATM are declining–and byextension, deployers' profit margins are being increasinglysqueezed,” the report noted.

Hanisch and others predicted as well that the BofA move wouldsignal to other financial institution ATM deployers that they toocan raise fees–although they might not raise them as much as Bankof America has.

But Jim Park, CEO of Florida based Credit Union 24, downplayedthe fee impact on ATM use overall, though he acknowledged that theBank of America move could start a trend of fee increases.

“I don't think fees, by themselves, are going to end the use ofATMs, at least not in our lifetimes,” Park said. “What I think theBank of America move does is offer us a golden opportunity to makeanother case for why credit unions' nonprofit approach is differentfrom that of banks and better for the consumer.”

In this Park picked up on a theme Hanisch had annunciated aswell–credit unions need to stop hiding the advantages of beingnot-for-profit cooperatives from consumers.

He pointed out that members of credit unions who use CO-OP haveaccess to over 25,000 surcharge-free ATMs around the country whileBank of America can only provide its customers with 17,000 ATMlocations.

Hanisch further noted that 6,000 of the CO-OP locations acceptdeposits from members of CO-OP affiliated CUs, and that this didaddress the phenomenon of shared branching.

“I think the advantages of being a cooperative in terms ofthings like ATM access and ATM fees remains one of the best keptsecrets about credit unions,” Hanisch said.

Park agreed, noting that its affiliation with ISOs has meant theCredit Union 24 can offer credit union members access to over100,000 ATMs, many of whom belong to the network's CU Heresurcharge-free program.

“The fact is that no matter what Bank of America or any of thebanks do, there is no reason a person anywhere right now has to payan ATM fee,” Park said. “We as an industry just have to work harderto make sure more people know that.”

–[email protected]