How do banks profit from automated-teller machines? ATMs have sprouted up all over during the last couple decades, and their convenience can’t be beat. But I thought banks make their money holding on to our money, so why would they bother doing something that would make it so easy for us to take our money back? I’m rarely charged an ATM transaction fee, but I suspect that using ATMs may not be as free as it seems. Please illuminate me. –Steven Brett, Evanston, Illinois
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Of course it’s not free–the bank just buries the cost in the other fees it charges you. (Fees, which may be disguised as minimum- balance requirements, are how the bank makes money on your checking account. The typical checking balance fluctuates too much to enable the bank to profit merely by making loans with your cash.) ATM charges weren’t always hidden. In the 1980s many banks began charging for ATM transactions, reasoning that customers would be willing to pay for the convenience. Many weren’t. ATM usage, which had been growing rapidly till then, began to level off in some markets. Banking-industry geniuses realized it was foolish to discourage ATM use since the alternative was maintaining a large and expensive staff of tellers. A teller transaction can cost two or three times as much as an ATM transaction, and sometimes even more.
In reference to “Question We’re Still Thinking About” in the March 10 issue: I have burped, farted, and sneezed at the same time, and I am still alive. –Dan Povenmire, Los Angeles
