Banking on ‘ATM freedom’

Banks in the Washington area increasingly are giving their customers “ATM freedom.”

In an effort to keep their best customers and lure others in the competitive market, many banks are eliminating the charges imposed when customers use a competitor’s automated teller machine (ATM) and even reimbursing the fee charged by the other bank — fees that can add up to $4 or more.

The catch: Customers usually must keep their account balances in the thousands to qualify.

Local branches of PNC, Commerce, Sandy Spring and Chevy Chase, among others, waive and reimburse the ATM fees for customers with high account balances.

Such banks offer them in hopes of retaining their best clients and encouraging them to keep all of their accounts at one bank, said Greg McBride, a financial analyst at Bankrate.com, a Florida Web site that tracks financial services information.

“Banking is very competitive, and it is expensive to attract new customers; it’s a lot cheaper to keep the customers you have,” Mr. McBride said. “The [policy] is essentially a way to dangle a little carrot in front of some of their most valuable customers.”

He predicted that the fee-waiving and reimbursement policies will continue to spread.

“I do think that this trend has not matured yet. We will continue to see more of this in various parts of the country,” he said.

Last year, consumers spent more than $4.2 billion in withdrawal fees, according to Bankrate.com. In the fall, about 98.3 percent of banks nationwide assessed surcharges of an average of $1.64 on noncustomers using an ATM, and fees charged by the customer’s own bank averaged $1.25. The bankrate.com survey found the Washington area had the highest average fees in the U.S.

One of the first banks to offer the policy, PNC Bank, reimburses its customers when they use any competitor’s ATM across the country. PNC tested the program in the Washington area when it moved into the region in May 2005.

“When PNC decided to enter the greater Washington market, PNC knew this was a very competitive market and we were looking for a way to differentiate ourselves,” said spokeswoman Sonia McCormick.

The Pittsburgh-based company then decided to adopt the policy at its 1,077 branches across the Mid-Atlantic region. Customers went from being able to use one of the 3,600 PNC ATMs for free to any ATM anywhere. Customers of Mercantile Bankshares and its family of banks will be able to qualify when PNC completes its purchase of the Baltimore bank company, expected in September.

“Customers love being able to know that every ATM in the world is their own ATM,” Ms. McCormick said. “People dislike paying for access to their own money.”

The policy is not available to all customers, however. To qualify, customers must maintain a monthly balance of $2,000 in their accounts, a requirement that was reduced from $2,500 in March.

Commerce Bank also reimbursed ATM surcharges as a way to attract new business when it moved into the Washington area in June 2005, said Kevin Gillen, the bank’s president for the area. The policy applies to all new checking account customers for the first year, but after that, customers must maintain a daily balance of $2,500 through the entire statement cycle.

PNC and Commerce are not alone in their restrictions.

Most banks adopting ATM reimbursement policies are offering them to fairly small target audiences, Mr. McBride said.

“This is a step for banks to retain the customers that maintain the highest balances and have multiple account relationships,” he said.

Local banks Chevy Chase Bank and Sandy Spring Bank reimburse customers for all ATM transactions if their multiple account packages maintain balances of $15,000 and $10,000, respectively. Limited free transactions per month are available to customers with smaller account packages at Chevy Chase.

National Capital Bank in the District offers limited monthly transactions to customers with account packages requiring minimum balances ranging from $5,000 to $15,000.

Reimbursing customers helps regional or local banks compete with larger banks that have ATMs across the country, Mr. McBride said.

“If that customer is traveling on the West Coast, they still have complete ATM freedom,” he said.

Though many banks in the Washington area offer reimbursement policies, they are still quite rare nationwide, Mr. McBride said.

Many, such as Bank of America, still charge for all use of competitors’ ATMs. And a more common practice is to waive the fee charged by the home bank, but not to reimburse the competitor’s fee.

But these policies also often come with limitations. One such bank, Wachovia, waives the fee for multiple account customers with an average account balance ranging from $1,000 to $10,000 depending on the account package.