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Some banks see an advantage in eliminating fees to use ATMs

Competition leads to more networks free of surcharges

MINNEAPOLIS -- Jay Gustafson, in an unfamiliar town for a job hunt and in need of some fast cash, gritted his teeth and hit the nearest ATM.

``For $20, I paid $25," Gustafson said, bemoaning the fees levied by both the bank that ran the machine and by his own bank for using someone else's machine.

Millions of Americans do the same thing every day, to the tune of an estimated $4.2 billion in ATM fees this year. But at a time when more banks are charging noncustomers more money to use their ATMs, some consumers are getting a break. Many credit unions and smaller banks are joining surcharge-free ATM networks to make up for not having large networks of their own to compete with national banks.

And one big bank, U.S. Bank, a part of Minneapolis-based U.S. Bancorp, expanded its network by buying the MoneyPass surcharge-free ATM network, giving its customers free access to 10,000 ATMs in 48 states, including 5,000 U.S. Bank-owned machines.

``We're in a constant dog-eat-dog fight for market share," said Rick Hartnack, a U.S. Bank's vice chairman.

Greg McBride, senior financial analyst with Bankrate.com, said U.S. Bank ``goes against the grain" of what other big banks are doing.

``This is a move to differentiate themselves from their primary competitors that have very large ATM networks themselves," McBride said.

Bankrate.com projects that consumers will pay $4.2 billion in ATM fees this year, a slight dip from $4.3 billion last year, but McBride said the trend is upward.

The financial website's latest semiannual survey found that ATM surcharges have soared more than 20 percent in the past two years. The fees banks charged to nonaccount holders averaged $1.60 this spring, up from $1.32 two years ago, and 98 percent of banks that own ATMs now charge fees to nonaccount holders, up from 89 percent two years ago.

Bankrate.com said fees imposed by banks on their own customers for using other banks' machines fell to $1.29 from $1.37 since last fall, and the number of banks imposing such charges fell to 81 percent from 89 percent a year ago.

Bigger banks already have a competitive advantage from their large ATM networks, McBride said. Charlotte, N.C.-based Bank of America Corp. has the largest among the bank-owned networks at nearly 17,000 ATMs nationwide. San Francisco-based Wells Fargo amp; Co. owns 6,500 machines in 23 states. But the country's largest surcharge-free ATM network is Allpoint Network, which has 32,000 machines in all 50 states. All of them are in retailers such as Target and Costco stores, and CVS and Walgreens pharmacies. Allpoint's participants are mostly credit unions and smaller banks, said Ben Psillas, president of the Bethesda, Md.-based network. Those institutions can then woo customers with the promise of 32,000 free ATMs, he said.

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