The Shotgun Blog
« Latest threats against Israel | Main | Communist China endorses Dion »
Tuesday, February 06, 2007
What Is a Reasonable Fee for ATM Usage?
When ATMs were first introduced over 30 years ago, financial institutions encouraged their own customers to use them, hoping to reduce teller costs. And for the most part this change has been successful.
When I was in England last summer, I was both pleased and surprised to notice that the financial institutions there all (at least all that I used) had official-sounding notices on their screens, telling people that they did not charge fees for using their ATMs. I could withdraw cash pretty much anywhere and not be charged for the service.
That's weird, isn't it? I was doing something, using a service, that used scarce resources (restocking time, interest costs for the cash in the ATM, depreciation of the machine) but I wasn't paying anything to cover those costs. I didn't bank at those institutions. I (and most of us from Canada who were there) was just receiving a freebie at the expense of the stockholders of those institutions. At the time I liked it, but I figured there must be legislation requiring these kind people to treat us so generously. It just didn't seem to me that zero transaction charges for ATM use would emerge in a competitive, profit-maximizing equilibrium.
And yet politicians continue to try to win votes by telling banks they should give away the ATM service. From the January 26th Nat.Post (courtesy of Jack, no link though),
Finance Minister Jim Flaherty is demanding Canada's banks explain why they charge fees to customers for using automated bank machines.
Mr. Flaherty said yesterday he has raised the question of scrapping the fees with the banks, and he is awaiting their response.
Bank customers use the machines, also known as automated teller machines or ATMs, for more than a billion transactions each year. Customers are charged for some of those transactions — typically there is a fee of $1 to $2 for withdrawing cash from a machine owned by a bank at which the customer does not have an account.
... Mr. Layton said the NDP will press for changes to the banking laws to eliminate the fees.
Why don't these politicians just come right out and say what they mean:
The banks earn profits and we want to redistribute those profits to our constituencies.
Is there some way to force an RSS feed from this blog to these politicians? Here is an excerpt of what I wrote on this topic earlier [see here and here]:
Where did we obtain the idea that we are entitled to no-charge ATM services? ATM hardware is expensive, and so is replenishing the machines. Banks usually provide ATM services for their own customers at no charge, as a way of attracting and retaining customers, but why do we think they should provide these services at no charge to everyone else?
... [P]eople's use of an ATM from another bank or using an independent for-profit ATM service is a convenience. But we do have choices:
* We can pay for most purchases with our debit or credit cards
* We can walk or drive a few extra blocks to a place with lower ATM fees.
* We can plan ahead and get more cash when we are at our own bank or at a no- or low-fee ATM.In other words, we do have choices. We may not like the inconvenience of the remaining options, but it just plain silly to promote the idea that we have no choice.
We have enough choice that it is unlikely the chartered banks are monopolistically exploiting their ATM users.
For more, see this at Gods of the Copybook, which says, in part,
On a perhaps obvious sidenote, does it strike anyone else as absurd that people complain about these fees? ATM machines don't exactly spring from the ground ready made and filled with multi-hued cash, ready to be dispensed. Does it not seem at least a little reasonable that banks should not be subsidizing the financial activities of their competitors' clients?
Again, from the Nat.Post:
"Mr. Layton said that customers in the United Kingdom are not charged these fees," Mr. Protti [Cdn Banking Association President] said. "However, he should realize that services are not delivered for free. There is a cost to providing banking services. Looking at one service in isolation does not take into account that the costs to provide it are recouped through higher costs for other products and services."
Posted by EclectEcon on February 6, 2007 | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d834515b5d69e200d83464858369e2
Listed below are links to weblogs that reference What Is a Reasonable Fee for ATM Usage?:
Comments
Lovely spin put on by the Post, as per usual...
I think the problem that will be addressed is more the price gouging and anti-competitive price-fixing that goes on between Canadian banks than the existence of the fees in the first place. The banks could likely recoup expenses and indeed turn a handy profit with a much smaller fee, but they instead they agree to keep the fees the same.
Never confuse monopolistic corporate behavior with free market capitalism.
On a related note, how come all the major banks are reducing branch hours and encouraging me to bank online, all while charging me for the privilege?
Posted by: Voice of Reason | 2007-02-06 2:35:55 AM
Canadian Chartered Banks will soon charge a fee for walking through their doors. My family and I prefer
Credit Unions and CoOperatives - Over the years I have observed that a typical Canadian Chartered Bank will charge a fee for any transaction they feel they can get away with. In the international sector Canadian Banks are still considered greedy amateurs.
MacLeod
Posted by: Jack Macleod | 2007-02-06 4:45:48 AM
Greed and Banks are a team. Paying fees for self-service is cutting into the paltry interest accrued. They just don't get the concept self-service means pay less.
Posted by: Liz J | 2007-02-06 5:30:47 AM
This issue is PROOF of the vast left-wing conspiracy.
The NDP has proposed a policy that is dumb (for all the reasons mentioned by EclectEcon). It also is something likely to be popular with a lot of people in the general public. Whether it is anger at oil company profits, drug company pricing, or bank "gouging" the idea of attacking corporate success is always popular. But the Conservatives cannot support Jack's proposal because they know it is foolish and because they are so unflinchingly pro fairness to business that they could not stomach the idea of going along with it.
The Liberals, by contrast, also know that this proposal is foolish, but they don't mind saying that they like it to snap up the voter support they will get as a result of taking that position. They also will more quietly reassure those in business that their support is really a vote-getting ploy and they have no real intention of stripping ATM fees if they get into power. Like so many other "broken" promises, this is one they will never mean right from the start.
So you see, the NDP is taking a bullet to help de-popularize the Conservatives. They are forcing the Cons to stand for the unpopular in a bid to help the Liberals resurge in popularity. And with a Liberal government thus delivered, the left-wing conspiracy will win again!
Pretty sneaky, huh?
Posted by: Mark Logan | 2007-02-06 7:51:04 AM
ATMs were originally brought in by the banks to lower the cost of live tellers salaries and benefits.
Now the Chartered Banks want to make profits by pretending the ATMs are a service unrelated to the live teller issue. Gougers.
I bank with Alberta Trust and am increasingly using only U.S. Banks for credit. They have significantly lower interest rates for credit cards and lines of credit.
Posted by: Speller | 2007-02-06 8:56:07 AM
I believe, the Banks are milking the populace. Dreaming up new fees whenever they think they can get away with it. I am afraid I have no sympathy for these banking cartels.
Just look at the Enron fiasco where according to this news article: "NEW YORK - Canadian Imperial Bank of Commerce has agreed to pay $2.4 billion to resolve investors’ claims it helped hide losses at Enron Corp., marking the biggest individual settlement since the energy trader collapsed in a massive accounting fraud." See full article at:http://www.cnbc.com/id/8801056/for/cnbc
Posted by: Stephen Gray | 2007-02-06 9:16:20 AM
You say that Canadians have a lot of choices about how to access their money and do their spending ... that is true, BUT YOU FORGOT ONE THING.
The majority of Canadians don't want choice, they want no-brain no effort, free everything.
Making decisions and having to pay for services that they cannot eat, drink or screw is just not on.
Most Canadians are so stupid that they don't understand that if the socialist squawkers get their way, the banks will simply raise fees in another areas to make it up. That is how business works.
I haven't paid an ATM fee in many years, because unlike my sheep-like fellow citizens, I am not afraid to carry pocket full of cash that I can withdraw in the bank whilst I make deposits or do other bank business.
It should be noted that using a debit card has a cost too. The one that really gets me is that these are also the the same idiots who run credit card balances at between 18% and 22%.
These are the same idiots who, if they have any money, let it sit in their accounts at anywhere from 0% to maybe 1% interest when they could transfer any unused balances to ING where they will pay no fees and get 3.5% on their money.
This is just more fiddling while Rome burns courtesy of shallow manipulating politicians.
Re carrying cash ... when was the last time you were mugged?
Re carrying cash, sometimes you can get discounts for cash especially in small proprietor business.
One more thought. If you don't want to pay the banks for their services, they buy their stock and receive the dividends they pay so you can at least get something back from them. Works for me.
The point is put that gamer control panel down or take a break from the boob tube or porn site or whatever you do to waste you time ... smarten up and learn a bit about money management.
You don't hear smart people with some dough in their portfolio complaining do you? Other than when GOVERNMENTS START MEDDLING IN FINANCIAL MATTERS THAT ROB THEM OF THEIR HARD EARNED SAVINGS AND INVESTMENTS. .....Take note Mr. Flatulence or is that Flaherty.
Posted by: Duke | 2007-02-06 9:40:44 AM
The real problem here is competition and ,I agree, the 'sheep' mentality of Canadians Duke refers to.
I mean really, Canadians are mental midgets when it comes to their finances. Probably a bi-product of our socialist system I guess.
Posted by: missing link | 2007-02-06 10:01:15 AM
I can walk to avoid the fees if I choose.
Judy wpg north
says there are no banks in the north end boo hoo where was she when they were getting held up monthly. Calling for lighter sentencing?
Posted by: ghollingshead | 2007-02-06 10:26:58 AM
Nobody pays fees per transaction if they don’t choose to or if they neglect to negotiate a package deal with their bank.
The issue is always about competition. Do we have enough of it in a sector like banking? The best way to answer that is to do comparative studies from other countries and on that basis Canadian banks are highly competitive on price. Service? Harder to measure, but if Canadians don’t like it why not let a couple of foreign banks buy a couple of Canadian Banks and let the rest merge with insurance companies who don’t have to do the hard stuff like carry dead weight inventory of cash nor make loans to small business which is tricky.
Now that Paul Desmarais is no longer telling Paul Martin how to run Finance why don’t we tell Great West Life and Investors Group that they are allowed to merge with a bank and all financial products are open for full scale competition in Canada like they are around the rest of the Industrial World (at least in those countries that aren’t controlled by corporate elitists like Desmarais)
Where we don’t have competition is in what the politicians are in charge of:
When I go to a kiosk and get my fishing or car license renewed I’m paying the government with my money. But I have to pay a fee at the kiosk to pay them. At least banks don’t charge me on the fee to pay the fee.
Finally, as you’ve pointed out, there is a cost to any service. If that service is going to be mandated free, guess what? There will be fewer and fewer ATMs, less convenience, but Jack Layton will be able to leave a legacy to brag about to Olivia - “ Honey I shrunk the ATM business”.
PS,
Maybe Harper should put in one of his next 5 priorities on democracy improvement “ You can’t vote if you haven’t taken Economics 101 and passed”
Posted by: nomdenet | 2007-02-06 10:45:16 AM
Thank you. Finally someone sticking up for the banks! Why should the shareholders have to shoulder the burden of a financial institution making $4,100,000,000 in a quarter as opposed to $4,400,000,000? Just to save Joe Paycheck a piddly $1.50 service charge? No way, commie.
Posted by: Rick O | 2007-02-06 11:07:41 AM
This site provides info on fees at British Banks.
http://www.bank.org.uk/
Their fees for services seem very high but I just skimmed through.
In Canada, President's Choice provides free banking that would work for many people.
Posted by: greenmamba | 2007-02-06 11:44:03 AM
Rick O , I’m assuming that’s sarcasm.
If so, you don’t pass Economics 101.
Your example just kicked $300 million out of profits in one bank. On a price earnings multiple of 15 that would mean a drop in shareholder market capitalization of $4.5 billion. Multiply that by 6 banks and it’s about $25 billion that will come out of pension plans, your RRSP .. .but I guess you don’t have an RRSP because Jack and Olivia will take you in … literally and figuratively.
Besides why not have the government run the banks and make more golf coarse loans in Shawinigan like the Da Petite Gar tried to get the BDC to do?
If our politicians run Banks it’ll be much better .. for them. The best way to steal from a bank is to own one, that’s what Jack would like to do.
Posted by: nomdenet | 2007-02-06 12:12:13 PM
Mark Logan,
Are you really Mark Logan, or are you just using his name out of convenience?
All,
There is a choice, when it comes to those machines.
And, anyone who would go to an ATM machine, and withdraw $20 and permit their bank or another bank to charge them $2.00, is a fool looking for someone to rob them of their money.
But the real showdown is that the younger generation has been conned into believing that the ATM machine is a good service, that people ought to pay for it.
The senior generation does not use these machines, because they prefer to speak with a person. That person is paid by the bank, and can respond to their questions right away. It is part of the world and also a social event, if you will. If the senior person has been diligent enough, and saved for their retirement, then chances are, they will be treated right by the bank, and not charged.
Oh, but young people become senior people eventually.
Which leads me to the query as to why a bank would treat their future successful clients with such contempt?
The real issue is with who benefits from the charges at the ATM.
We are accustomed to banks holding onto our money.
We are accustomed to placing our money into banks.
We are accustomed to low interest on our savings.
And, we are accustomed to the banks raking in high earnings.
We are accustomed, because placing money into one's mattress generally is a lesser of two evils. And GICs really are not much better, while real investment, well, it is all risky, and you cannot go there until you have saved through the bank system anyway. And RRSPs, aka mutual funds, are maybe slightly better than GICs. Income Trusts really held the way of the future, but they went bye-bye.... And the least favorable alternatives are: investing oversees, aka Nigeria....
So, all this to confirm that there are actual limitations to what we can do with our earnings.
Instead of arguing about those ATM charges, simply avoid them altogether.
What we ought to be discussing, is something a little more interesting. And by that I mean, wealth creation -- how to get a bigger slice of that pie. Everything else is that Taliban-jack-whinism. If the banks see the market of ATMS falling, they can choose to either discontinue them (one here, one there is also advertising for the bank) or they can consider them part of the cost of doing business. After all, businesses pay for VISA?MASTERCARD, therefore why shouldn't banks pay for their own ATMs. As to whether they ought to be forced by socialist agenda, well that is typical of them leftists. Always trying harder to screw with that which they know nothing about, and would destroy if they had their way with it.
Posted by: Lady | 2007-02-06 2:19:12 PM
Lady says “we are accustomed to low interest on our savings”
Actually, many old folks are not yet accustomed to low inflation and they tend to blame the banks for low interest rates because in their hearts they liked Trudeau and out of control spendfing that drove up their savings rates. That’s why a lot of old folks don’t like Conservatives, they are too responsible to the next generation … :>)
“We are accustomed to banks raking in high earnings.”
Well this is like the argument that the big oil companies are always raking in it. If it sounds so assured then buy the stocks in banks and oil companies.
“What we ought to be discussing is wealth creation”
Now you’re talking. The problem with Jack Layton is that he’s a millionaire , inherited , hasn’t a clue how wealth is created any more than Paul Martin did who was given a sweetheart deal on CSL by Desmarais so Martin could be his puppet in Ottawa.
What we need are more entrepreneurs and for that we need more free flowing risk capital and a culture that doesn’t think good profitability is a sin. And that don’t freak out when a company makes a lousy billion dollars.
Deregulate the big banks and Bell and Shaw cable and let them be bought out by foreign banks or communication companies. Canada is too tiny to have anything real big; we don’t have the population size to justify it. Redeploy that capital and let’s get more RIMs started. Government needs to get out of the way and Desmarais needs to stop telling Ottawa how to run the finances of this country. Let insurance be sold in Bank branches. Let insurance companies buy banks and vice versa. Join the 21 st century. Right to your MP and tell them to start deregulating business and let the invisible hand of capitalism work.
Posted by: nomdenet | 2007-02-06 4:54:59 PM
This sounds like political strategy: Conservatives talk up the issue of bank fees to the point where the vast majority of economic illiterates want government "action".
The conservatives then peel the economic illiterate vote off of the Liberals (to the NDP).
If the Liberals try to making their own bank-fighting policy, they lose some of the economic literate vote.
Posted by: pete e | 2007-02-06 9:26:24 PM
This subject has the most complex backgrounds on this forum, what I have seen here.
Is this thread meant as a vent for the pent-up anger of the customers of banks?
Posted by: Cato | 2007-02-06 10:16:11 PM
nomdenet,
Just because I mention big profits, does not mean that I oppose big profits. OK?
Now, you have brought up that thing about [gulck] jack.
The thing that really really nauseates me about the ndp, is that they are a bunch of has been hippies, who get together, smoke whatever, relish in the olden days, while living off some large incomes, while shouting how guilty they feel, that there are street people.
No society, ever worth its salt, ever got anywhere off of knee jerk reactions. But that is all they are. And, what is worse, they use the terrorist lobby to add power to their cause. Sickening, sheer sickening!
You know just how many millionaire ndpers there are, who still wax painful about the peasants, and the bourgoisie?
Now, I have nothing against people being millionaires. But to go around talking like a socialist peasant is pure bs!
I have indeed perspired.
And, while jack was proped up in social housing, at tax payers expense, he was earning over 6 figures.
The whole thing makes me sick!
The only time in the history of Canada that public housing was addressed to the extent it ought to be, was under Conservative leadership.
Why?
Because conservatives do things on principle. We know the importance of food, clothing and shelter. The farther you go to the left, the less likely we are to see policies based on wealth creation, and sound social decisions, for the benefit of Canada as a whole. Which is why, during the Liberal tenure, incomes in Canada stayed at the same level, are went down in value, while homelessness grew to outrageous proportions.
And no one could possibly convince me that billionaire Paul Martin, or Jean Creten gave two hoots about the issue. They were happy they were getting richer, while the poor were forced into a category that said they could accept drugs in lieu of happiness, as it was not their fault.
Well, it was the fault of the Liberals, AND the ndp!
Posted by: Lady | 2007-02-07 2:02:58 PM
The comments to this entry are closed.