A couple of the country’s biggest banks are in the process of introducing new ATMs that allow their customers to withdraw in increments of $1 and $5. Is this a good idea or just another way for big banks to gobble up fees?
There are hundreds of new ATMs capable of dispensing as little as $1 have been been unveiled around the country in recent weeks. One of those banks, PNC, allows its customers withdraw as little as $1. Ah…but then there are those hefty ATM fees. So far, there have been close to 400 of these ATMs over the past year or so; new numbers suggest we could see double that amount by the end of the year. Customers who are choosing these lower increments are being offered a “custom denomination” option. They can tell the ATM they’d like their money dispensed in all one dollar bills or a combination of any other denomination, except coins, of course.
Most of the new ATMs are found on bank property at their own ATMs. While we can’t withdraw coins at this point, rumors are that it too could soon change. Unfortunately, as great as these new options are, there are no shortage of ulterior motives on the banks’ part. These new efforts are to put into place what are essentially virtual tellers. This eliminates having to bring aboard new personnel for banks. In fact, to add insult to injury to millions of bank tellers around the country, these new machines are being referred to as “new teller platforms”. Consumers can use the ATMs in the traditional ways, but they can also pay their credit card bills along with the option of loading the bank’s own prepaid debit cards with cash, too. PNC, for its part, has upgraded more than half of its 7,000+ ATMs around the country to dispense the lower denomination. It says all of its ATMs will have this option by this summer.
Benefits for Consumers
So what are the benefits for customers? It’s simple – though it’s going to cost them. We’re talking about big banks, of course; they’re not going to do anything that doesn’t prove profitable for them. The option to get exact change will be a plus for customers – including those with low account balances who want to take out less than $20 or who need $25 but don’t want to take out $40. They may only have $35 in the bank, which up until now, they were unable to withdraw in that denomination. The trick will be for those whose bank accounts are low to withdraw what they need while leaving enough to cover the bank fees that are sure to follow.
Greg McBride, a senior financial analyst at Bankrate.com, sums it up this way,
Particularly in difficult financial times when peoples’ account balances have been lower, not having to withdraw more money than you really need is helpful.
Currently PNC is offering the new ATMs at no cost for its customers; however, out-of-network fees apply to non-customers as they do for any of the banks’ ATMs. The price for those using out of network fees could hover around $3, which doesn’t include the fee your own bank will charge you for using any other ATM it doesn’t own.
Do the Math
Here’s where it can become problematic. Let’s say you have $39 in the bank. You need $30, but up until now, you would have been allowed to withdraw only $20, which would leave the $19 in the bank. Now, you can withdraw the $30, which leaves a balance of just $9. The bank fees will likely gobble up the lion’s share of that $9, but at least you got your $30. But what about those who withdraw, say, $5? They too will face the same fees as someone who’s withdrawing $100. It could be it costs them more to withdraw that $5. That ranks right up there with payday cash advance interest, say some critics. It could well be that some bank customers pay 100% in fees based on their withdrawals. This could send up red flags for consumer advocates.
Other Banks Following?
If these new options prove fruitful for the few banks now offering them, other banks could soon follow in order to up their own profits in the process. That said, it’s not likely to happen for months as growing pains are worked out and consumers realize they now have those options. There are expenses for altering the ATMs for meet these new denominations, especially if coins are introduced into the mix. And, too, there are those who say it’s not likely either way. Both Wells Fargo and Citi say they have no plans to offer these revamped ATMs with their denomination alternatives. TD Bank already has a few that dispense $5, but it doesn’t have plans for the future to expand the $5 denomination nor do they have plans to offer $1 denominations. Meanwhile, a Bank of America spokeswoman declined to comment at all on any future plans, though she did say the banks ATMs currently dispense $10 bills and that the bank “always looks at ways to make banking at our ATMs more convenient.”
Again all of that could change, especially if it’s seen as a way to make up lost revenue from new restrictions put into place as a result of new banking laws, including Dodd Frank and the 2009 CARD Act. Not only that, but there are some who say it might even be more cost efficient for consumers to take out cash advances on their credit cards, dependent, of course, on their unique financial needs.
What are your thoughts on these new ATM opportunities? Does your bank balance ever go low enough that this would be an option you consider? Does this feel more like a way for banks to profit on those consumers whose options are fewer or does it feel more like a genuine effort to make banking easier for customers? Share your thoughts with us in our comments section or join the conversation on Facebook.