The ATM Denial Fee

Excerpts from MSNBC. Bob Sullivan covers Internet scams and consumer fraud for MSNBC.com.

Some banks are sneaky; their ability to slip itsy-bitsy fees onto your monthly statement proves their creativity knows no end. The death-by-a-thousand-cuts draining of our bank accounts happens relentlessly -- $3.00 check enclosure charge; $2 out-of-network withdrawal fee; $10 for dipping below a minimum $1,000 balance for an afternoon; $13 for new checks. One of those fancy free checking accounts can easily cost $50-$100 a year.

But the denial fee is a new entrant into this game, or at least, it is new to me and many industry insiders…Here's how $1.50 leaked out of my checking account for money I didn't get, and how it might be leaking out of your account too.

What's your daily ATM withdrawal limit? If you said $400, you might be wrong. At Bank of America, for example, the limit is $300…My first attempt to get $400 was denied and my transaction canceled. Moments later, I tried to withdraw $300, and was warned I'd face fees both from the machine owner and my bank for using the wrong ATM. (A month later) I found that I was charged $2 for the cash I did get, and another $1.50 for the cash I didn't get. ATM Denial Fee, my statement read.

The rep calmly explained that it was, in fact, an ATM Denial Fee. I must not have read the latest disclosure statement from the bank, he said. He then explained that Bank of America is charged fees by other banks when a withdrawal is attempted, whether it is successful or not. This bank-to-bank fee can be $5, $7, or even more, he said. He then explained to me that the bank actually eats close to 90 percent of these fees and is just trying to recoup some of the costs.

I called Tony Hayes of Dove Consulting, an ATM expert. He'd never heard of ATM denial fees, and he was skeptical that Bank of America would have to pay the $5-$7 that its customer rep quoted me for a failed withdrawal.

Then I tried Greg McBride of BankRate.com, who studies ATM fees. His oft-cited reports are among the most comprehensive in the industry. "That's a new one on me," he said.

But Betty Riess of Bank of America knew all about denial fees. In fact, she said, there's nothing new about them. The bank had been charging them "for some time." There was no updated notice earlier this year, she said. She also wouldn't discuss the intra-bank fees my customer service agent mentioned, but she did say she had no idea where he got his facts. Denial fees are spelled out on Bank of America's Web site.

McBride, from BankRate, was surprised to learn of this denial fee, but he did say something that is probably obvious to all of us -- bank ATM fees are at the highest rate ever. In fact, in a report he issued earlier this year, McBride said consumers pay $4 billion each year as a penalty for using the wrong bank's ATM. That's up 44 percent from 1999 levels, his report said…

But we're just trying to run a business, banks protest. In the past, I have heard the following arguments from banks: Consumers have more access to their money than ever before, and should pay a little for that. ATM machines are actually expensive to operate, and most banks lose money on them (see " Are there too many ATMs). And banks face fees from each other, so consumers should expect to cover some of that cost when they use the "wrong ATM."