I came across this bus shelter ad in San Francisco today, proclaiming that Bank of America has “Over 600 ATMs and 140 Banking Centers in the Bay Area.” Impressive! Until, of course, you go to their site and can only find 25 ATM locations in San Francisco. 600 ATMs in the Bay Area but only 25 in San Francisco?
The Wells Fargo site gives us a clue to this puzzle — they also have 25 ATM locations in San Francisco, but they helpfully list the number of ATMs at each location. Since most locations have multiple ATMs, they actually have 42 ATMs total in the city. Likewise for Washington Mutual, which lists 20 ATM locations in the city, but probably has at least twice that many if you count by ATM.
B of A’s ad is probably accurate, then, but isn’t really answering the right question. As a consumer, my questions are: how likely am I to find one of my bank’s ATMs when I need one? And if I can’t find one, what am I going to have to pay to get my money out of some other bank’s ATM? Number of ATM locations for a bank matters more to me than number of ATMs, but according to their web sites, these three banks don’t really differ by that metric (25, 25, and 20 locations respectively). On the second question, according to Bankrate.com, in 2005, the average fee for withdrawing money from another bank’s ATM was $2.91. (Remember, you probably are charged two fees, one by the ATM and one by your bank.) Bankrate.com also estimates that in 2005, American consumers paid “more than $4.3 billion in withdrawal fees for using ATMs not owned by their own bank.”
$4.3 billion dollars in one year. That’s a lot of money to pay for getting your own money.
So, how many ATM locations does my bank, USAA, have in San Francisco? I don’t know exactly, but in a sense, it’s at least 65. I can use any Bank of America, Wells Fargo, or Washington Mutual ATM — or any other ATM — and my bank will not charge me for doing so (up to ten times a month), and will reimburse me up to $15 a month (footnote 4) for fees charged by other banks’ ATMs. If I use an ATM somewhat less than twice a week (assuming I don’t use an ATM at a horse track, or somewhere else where the fees are cranked all the way up), I pay nothing at all to access any of the ATMs, at any location, in San Francisco.
The reason for this is simple: USAA is an Internet bank, and it doesn’t really have any ATMs in San Francisco. To get customers in the city, they need to find ways to make their solution work for people. They’re hungrier, and they’re willing to spend more making their offering attractive. That’s great. Going back to Bankrate.com again, their report confirms that Internet banks like USAA may be a better deal for consumers:
The average balance required to avoid fees on interest checking accounts is only half as bad at Internet banks, $1,250 versus the $2,465 required at traditional banks. Even the average monthly service fee is approximately half, running $5.50 at Internet banks versus $10.85 at traditional banks.
In exchange, you’ll be able to sink your teeth into higher interest earnings. The average yield at Internet banks is 1.96 percent, dwarfing the 0.32 percent at traditional banks.
Internet banks are hungry right now — they’re looking to make headway against traditional banks like B of A, Wells, and WaMu. If you’re looking for a good deal, don’t count the number of ATMs any one bank has in your area. Instead, count the number of dollars an underdog is willing to pay you for your business. $4.3 billion dollars says it will be worth your while.