Who Pays More in ATM Fees at Large Banks?

Abstract

This paper explains why large bank customers living in low or moderate income neighborhoods (LMI) pay more in fees for automated teller machine (ATM) use than those in other areas. To determine who pays more in ATM fees, I looked at customer checking account data at several large banks to determine if demographics, account type selected or account usage leads to higher fees. For demographics I use Census tract income, population density, and age. For account type selected, I looked at the distance of the customer (based on their Census tract location) to the location of the closest branch for their institution to see if customers who must travel further to get to their branch pay more in ATM fees. I also used tenure with the bank and the level of account requirements to avoid fees. For account usage I looked at withdrawal activity, deposit activity, average balances and the amount of cash taken out each month. This study looked at data from several major banks consisting of every transaction from a significant sample of the banks’ customers over a 12-month period in 2011. I found customers living in LMI neighborhoods relied more on cash transactions from an ATM than in other areas. I discovered how living far from the closest branch results in greater ATM fees in LMI neighborhoods and how the volume of withdrawal transactions drives up ATM fees paid.