Avoid cash machines that charge

By Sarah Modlock

15 March 2006

It has only happened once or twice but I have been caught out and had no other option but to use a cash machine that charges. The first time, I thought 'What the hell, it's a one-off'. It was about 2am and there was a black cab with the meter running so needs must. The next time, my excuse was flimsy and I vowed to plan ahead and avoid being ripped off.

It's may seem crazy to pay up to £1.75 as a flat fee for withdrawing your own cash, but avoiding the toxic ATMs is not as easy as you might think. Five years ago, almost all UK cash machines were free but now almost half charge a fee. The growth in charging has come from the expansion of independent operators which have been busy installing hundreds of ATMs in places where they would not normally have been found. Petrol stations, corner shops, pubs, shopping centres, nightclubs and remote areas without bank branches are all favourites.

Many of these sites were considered to be unprofitable by high street banks who also sold off thousands of their cash machines to the new operators such as Moneybox, NCR, Cardpoint, Travelex and US-based Cardtronics. Royal Bank of Scotland , which operates a network of non-charging cash machines, owns Hanco, a charging machine operator.

Free cash machines?

Although the usage of high street bank ATMs is perceived as free, the cost is, of course, ultimately passed on to the customer in some way. So the big banks are able to offset the cost of running and maintaining ATMs from other profitable banking activities, but the independent operators' only revenue stream is the income they receive for providing this ATM service. As well as having to cover their own costs, a fee has to be paid to the owners of the site where the machine is located.

Research from the Nationwide indicates that the encroachment of fee-charging ATMs is gathering pace and MPs have said that they are concerned that people without easy access to transport have no option but to use fee charging ATMs, particularly as many rural UK banks and post offices have shut in the past few years. But for many people, the £1.75 is a small price to pay for the convenience of being able to get their mitts on some cash where they are rather than travel several miles to the nearest free machine.

But the UK 's network of free ATMs is unlikely to disappear anytime soon; UK banks have pledged that they will not start charging their own customers to use branch based ATMs. Perhaps they have learnt their less from the customer backlash in 2000 to the introduction of 'disloyalty' charges for customers who used rivals ATMs.

Now consumer groups are worried that card holders are not being made properly aware that ATMs they are using charge for withdrawing cash. A notice stuck on the outside of the ATM alerts consumers to the fact that it charges a fee, typically of about £1.50 per withdrawal. Then an on-screen message tells users that if they withdraw cash a fee will be incurred.

But MPs, consumer groups and even high street giants Nationwide and Halifax have said that the warning stickers are often hidden away and on-screen alerts can occur just prior to when the user withdraws cash, rather than at the start of the process.

Andrew Hagger from Moneyfacts agrees: 'The recommendation for clear signs regarding charges at ATM sites is a step in the right direction, but doesn't go far enough. It would be more useful if the sign also told customers where the nearest fee free machine is, so they could make an informed choice of where is best to withdraw their money.'

Opponents to fee-charging ATMs, including Which? and Citizens Advice, argue that charges hit people on low incomes hardest, as these people are more likely to make smaller, more frequent withdrawals and are therefore bearing a disproportionately large share of the charges. 'ATM charges are simply another example of the poor paying more - in this case they are paying a high price just to access their own money,' says Claire Whyley, of the National Consumer Council.

The battle continues

Fee-charging ATM firms argue that they are providing a service and that consumers have a choice to use their machines or not. They point out that the fees charged are vital to keeping the ATMs in place. If a fee was not charged then there would be no ATM, they contend.

Even critics, such as Nationwide, do not want an end to fee-charging ATMs. Instead, they are looking for greater controls over their location and more effective alerts over fees charged. They suggested a 'red' and 'green' sign system which indicates at a glance whether an ATM is free to use. This prompted mixed responses from the industry, with many big banks claiming all their ATMs were free and they had no plans to change this and so more signs would simply confuse customers.

Last March, the parliamentary Treasury Select Committee issued a report calling for clearer warnings on fee-charging cash machines. But in its response to the committee's report, the government gave charging ATMs the all-clear, pointing out that the vast majority of fee-charging ATMs were in locations where there had never been a free cash machine.

Laurence Baxter of Which? responds: 'The government's 'see no evil, hear no evil' approach to cash machine charges seems to be continuing. Knowing the banking industry does not excel at providing a fair deal for all its customers, the onus is on the government to stop putting blind faith in the ATM industry. It must step in to ensure banks provide free cash machines in all areas, particularly deprived communities.'

Have your say

Citizens Advice is urging people to have their say about cash machine charges as part of a national campaign. They are being asked to take part in an online survey on the national Citizens Advice website www.adviceguide.org.uk about how cash machine charges affect them.