Free-ATM banks hit by hikes

Despite a national trend toward raising automated teller machine fees, some banks’ customers don’t pay ATM fees at all.

These banks don’t charge their customers to use other banks’ ATMs. In fact, these banks reimburse their customers the $2 or more charged by the ATM’s owner.

Now, because Bank of America Corp. (BAC) just increased fees at ATMs in its banking centers to $3 and others may follow suit, these free-ATM banks will either have to pay more to reimburse their customers, or their customers will face more-limited free withdrawals.

“What it will impact is, obviously, the cost of our customers using their ATM,” Mechanics Bank President and CEO Steven Buster said. “We intend to just pay that, as we always have.”

Mechanics Bank, based in the East Bay but with a rapidly growing San Francisco location, is one of a number of regional banks that have quietly been using “ATM rebates” to compete with big banking companies with huge ATM networks. It offers unlimited ATM rebates with some checking accounts.

Merrill Lynch & Co. Inc. (MER) subsidiary First Republic Bank and Charles Schwab Bank (SCHW) also offer unlimited ATM rebates on some types of accounts. Both banks have certain requirements for those accounts, such as direct deposit or a minimum balance to avoid monthly service charges.

Other local banks offer a limited amount of ATM rebates per month, including San Francisco-based New Resource Bank, Schwab and Wachovia Corp. (WB). Some banks will only provide ATM rebates for ATMs owned by banks; others will even refund that $4 fee for the ATM at the pub.

In general, these banks do charge outsiders who use their ATMs, just like other banks. But their executives said they see a good business model in reimbursing their own customers the money they spend at other companies’ automatic tellers.

“We can either choose to go out and reduplicate the network [of bigger banks] or use the existing network, and for us, it’s ‘Which cost do you want to pay?’” New Resource Bank Vice Chairman Peter Liu said.

Buster said that for Mechanics Bank, the cost is much less than building its own ATM network, and serves as a marketing vehicle.

“That attracts depositors and it builds trust,” he said.

Wachovia, which is about to convert eight San Francisco branches of World Savings Bank it bought through its acquisition of Golden West Financial, uses a $6-a-month limited ATM rebate to attract customers in its new markets, including New York, Texas and California, spokeswoman Eileen Leveckis said.

kwilliamson@examiner.com

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