FREQUENTLY ASKED QUESTIONS ABOUT ATM FEE REFORMS

1. Why has the system changed?
2. How have ATM fee arrangements changed?
3. What is direct charging?
4. What is a foreign ATM?
5. Which cardholders are affected by these changes?
6. My financial institution did not previously charge for foreign ATM transactions
7. When did the changes start?
8. Which ATMs are affected by the changes?
9. Which transactions incur an ATM direct charge?
10. How much is the direct charge?
11. Where can I find out about the level of direct charges?
12. Will my own financial institution continue to charge me fees for foreign ATM transactions?
13. Do these changes affect transactions I make at ATMs owned by my own financial institution?
14. Why do I need to be told the direct charge fee every time I use a foreign ATM?
15. Will transactions take longer at a foreign ATM?
16. How do I avoid paying direct charges?

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1. Why has the system changed?

The system has changed to ensure that: fees paid for cash withdrawals are more transparent and are subject to competitive pressure; ATMs will continue to be widely available and provide consumers with choice; and competition between financial institutions is enhanced.

Most people do not pay to use an ATM that is owned by their own financial institution. However, some financial institutions charge their customers a fee to use a machine owned by someone else, known as a ‘foreign fee’. Where applied, foreign fees are not disclosed at the ATM; they usually appear only on an account statement. These fees are not transparent and cardholders have no choice in the level of foreign ATM fees they pay to their financial institution. Prior to March 2009, foreign fees were as high as $2 per transaction.

Underpinning high foreign fees prior to March 2009 were fees ATM owners charged to financial institutions when customers used their machines (the interchange fee). This interchange fee was fixed and therefore may have made it uneconomic for ATM suppliers to locate ATMs in higher cost locations. Had this inflexibility continued, it may over time have reduced the availability of ATMs.

A package of reforms to the ATM industry has been introduced to address these problems. One element of these reforms is the elimination of the fee paid by your bank to the ATM owner, replaced by a direct charge by the ATM owner. Many banks have removed foreign fees as a result of the changes, although some maintain a reduced fee.

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2. How have ATM fee arrangements changed?

Prior to the reforms, each time you made an ATM transaction at an ATM not owned by your own financial institution, your financial institution paid a fee to the ATM owner for that service (the interchange fee). That fee was then often passed on to you as a ‘foreign fee’. Foreign fees were typically much higher than the cost of an ATM transaction and had increased over time.

As part of the reforms, the fee that financial institutions pay to ATM owners has been eliminated. Instead, the ATM owner now recovers the fee directly from you as a direct charge, which is displayed on the screen before you commit to the transaction.  At this point, you have an opportunity to cancel the transaction without charge or proceed.

Under the new arrangements, banks are free to determine ‘foreign fees’ charged to their customers for using another institution’s ATMs. Some banks have chosen to continue to apply such fees, but at a lower level than prior to the reforms. But the Reserve Bank is of the view that, since the reforms are designed to make the pricing model for ATMs more transparent and responsive to competitive forces, the continuation of foreign fees, even at these lower levels, is unjustified and against the spirit of the reforms. This is particularly the case given that most banks charge a monthly account-keeping fee and that the cost to a bank of its customers using another institution’s ATM is very small. In the Bank’s view, there should be no foreign fees.

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3. What is direct charging?

Direct charging is the most visible component of the reform package. It is a more transparent way of charging for ‘foreign ATM’ transactions. So when you use a foreign ATM, you will see a screen that will tell you how much you will be charged for the transaction. You will then have the choice to cancel the transaction without charge if you think the fee is too high and prefer to use a cheaper ATM nearby.

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4. What is a foreign ATM?

A ‘foreign ATM’ is any ATM that is not owned or operated by the financial institution you bank with. A foreign ATM, for the purposes of direct charging in Australia, is not an overseas ATM.

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5. Which cardholders are affected by these changes?

In general, any cardholder who uses an ATM in Australia that is not owned by the financial institution they bank with may be affected by direct charging. However some – typically small – financial institutions have in place arrangements that allow customers to make fee-free withdrawals from some foreign ATMs.

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6. My financial institution did not previously charge for foreign ATM transactions

Prior to the introduction of direct charging some financial institutions chose to absorb ATM owners’ fees for your ATM transactions. This option is still available under direct charging. An institution may choose to rebate any direct charge levied on its cardholders at a foreign ATM, or may arrange fee-free access for its customers to a larger network of ATMs.

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7. When did the changes start?

The changes came into effect on 3 March 2009.

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8. Which ATMs are affected by the changes?

Since 3 March 2009, most of Australia’s 26,500 ATMs have shown the ATM direct charge on the screen. However, about 2,500 ATMs have been unable to do so immediately. These ATMs will initially use stickers to clearly display the ATM direct charge.

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9. Which transactions incur an ATM direct charge?

ATM owners are able to charge you for withdrawals and balance enquiries. However, you cannot be charged for any transaction that is ‘declined’ or unsuccessful.

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10. How much is the direct charge?

ATM owners make their own commercial decisions on how much they charge for foreign ATM transactions. Importantly, given that these fees are shown on the ATM screen before the transaction is finalised, you will be able to decide whether to use the ATM or not.

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11. Where can I find out about the level of direct charges?

The ATM direct charge will be displayed on the ATM screen before a transaction is completed. General information about the direct charges applied by different ATM owners can be found on the CHOICE ATM Watch website and the ATM Fee Tracker Australia website.

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12. Will my own financial institution continue to charge me fees for foreign ATM transactions?

This is a matter for individual financial institutions. But the Reserve Bank is of the view that, since the reforms are designed to make the pricing model for ATMs more transparent and responsive to competitive forces, the continuation of foreign fees is unjustified and against the spirit of the reforms. This is particularly the case given that most banks charge a monthly account-keeping fee and that the cost to a bank of its customers using another institution's ATM is very small. In the Bank’s view, there should be no foreign fees.

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13. Do these changes affect transactions I make at ATMs owned by my own financial institution?

No. These changes do not apply when you use ATMs owned by your financial institution. If your financial institution has arrangements to share other ATM networks, it is likely the changes will not apply at those ATMs either. Ask your financial institution for more details.

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14. Why do I need to be told the direct charge fee every time I use a foreign ATM?

A key aim of the ATM reforms is to improve transparency by making ATM charges clearer. Direct charging lets you know upfront how much the ATM owner is going to charge you to use the ATM.

The fee may vary depending on who owns the foreign ATM and could also vary depending on the location of the ATM. Seeing the direct charge on screen will help you decide whether to use that ATM or to cancel the transaction and go to another ATM.

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15. Will transactions take longer at a foreign ATM?

These changes only add a few seconds to the time it takes to make an ATM transaction.

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16. How do I avoid paying direct charges?

Most financial institutions do not charge customers to use their own ATMs. So if you wish to avoid direct charges, you should withdraw cash from an ATM owned by your financial institution. Many small financial institutions that do not have an extensive network have entered into arrangements with other networks to provide fee-free use of ATMs for their customers. You should ask your financial institution which networks you can use free of direct charges.