Bank machine fees: do the math!
By John Kane
John Kane is Manager of Communications at the Financial Consumer Agency of Canada (FCAC), a federal government agency that protects your rights as a consumer and gives you information about financial products and services.
Did you know that it could cost you more than $6 to withdraw cash from an ABM?
Imagine you're out at dinner at a restaurant. When the bill comes, you are informed that they don't accept credit or debit cards, but the waiter helpfully points out a nearby cash machine. Unfortunately, it's not one that belongs to your bank. Think hard about your next move: if you opt for the convenience, your ABM fees could potentially cost you more than the tip you leave for the meal.
Bank machines, sometimes called Automated Banking Machines (ABMs), are so convenient that it can be hard to remember what life was like before they came along. But the convenience of having access to your account comes at a price. Many people don't realize just how much it can cost to withdraw money from an ABM that does not belong to your own financial institution.
The good news is that you can save money by planning ahead and taking a few simple steps. The first is to learn about the fees that are charged in these types of transactions. There are two main types: network access fees and convenience fees.
Network access fee
A network access fee is a fee charged by your own institution for using an ABM that is not part of your institution's network. This fee can be as high as $1.90.
In addition, when you withdraw cash from a machine that does not belong to the financial institution where you have your account, the operator of the machine will charge you a convenience fee. Before this happens, the ABM must display a message indicating the fee to be charged, and give you the option to cancel the transaction if you decide not to proceed.
If you go ahead with the withdrawal, the cost will vary depending on who owns the ABM. Most banks charge $1.50 to non-customers who use their machines, and most credit unions between $1.00 and $2.00. Private (or "white label") cash machine operators often charge anywhere from $1.50 to $3.00 per transaction in convenience fees - although it's worth noting that they aren't bound by any maximum fee, so it could be more.
Adding it up
When you add the network and convenience charges to the regular account fees that you may be charged for the transaction (which can be as much as $1.00), you see that you could end up paying more than $6.00 for accessing your own money. On a $20.00 withdrawal, that would mean paying charges totalling over 30% of the value of your transaction.
How to save money
Fortunately, there are things you can do to save money:
- Use your own financial institution's ABMs as much as possible to avoid paying unnecessary fees.
If you don't think you'll have a chance to get to your ABM, consider asking for "cash back" when you make a debit card purchase. Many stores will add extra money onto your purchase and then give you the cash back once the debit card purchase is approved. For example, if you're buying milk at $3.50 and you ask for "cash back" of $20 the total sale will be for $23.50. Once you've punched in your personal identification number (PIN) and the sale is approved the cashier will give you the surplus $20 in cash. Check to make sure the store doesn't charge a fee for this service before you request it.
- If you must use another institution's ABM, take out more money at once so that you don't have to pay fees for several withdrawals.
Finally, you might also want to check to make sure that your banking service package suits your banking needs and habits. If you tend to withdraw money from ABMs often, or if you make many point-of-sale purchases at stores, be sure that your account package reflects these habits.
If you're not sure whether your account is the best one for you, the Financial Consumer Agency of Canada (FCAC) may be able to help. FCAC has created a simple interactive tool that can help you compare banking packages from the comfort of your home. After answering a few short questions about your banking needs and habits, FCAC's Cost of Banking Guide tool will present you with a short list of banking packages from different financial institutions that match your profile. It's that simple. Just visit www.fcac.gc.caand look for the Cost of Banking link, or call FCAC toll-free at: 1-866-461-3222 to get a print copy of the Guide delivered to your home.