Automated Teller Machines: Banks Reported That Use of Surcharge Fees Has
Increased (Letter Report, 05/16/97, GAO/GGD-97-90).

Pursuant to a congressional request, GAO provided information on
fee-charging practices of banks and thrifts with regard to automated
teller machines (ATM) used by individuals who do not hold accounts at
the institutions owning the ATMs, focusing on GAO survey data on the
number of: (1) banks that operate ATMs; and (2) these banks that
surcharge non-account holders and the amounts of the surcharges
assessed. GAO did not attempt to determine the effect surcharge fees
have on the deployment of new ATMS or intend to address whether ATM
operators are adequately disclosing information on ATM fees to
customers.

GAO noted that: (1) on the basis of its survey, GAO estimates that, as
of February 1, 1997, about three-fourths of all banks in the United
States operated ATMs; (2) of the estimated 8,600 banks that operated
ATMs as of February 1, an estimated 8,000 had ATMs as of December 31,
1995; (3) in addition, GAO estimates that, as of February 1, 1997, banks
operated about 119,000 ATMs, an increase from the 89,000 ATMs they
operated at the end of 1995; (4) over this period, the reported
increases in ATM deployment occurred at both on-premise (i.e., at
banking facilities) and off-premise locations (i.e., at locations not at
a banking facility); (5) about one-third of the banks that operated ATMs
reported that they imposed surcharges on non-account holders who used
their machines; (6) more of the large banks than smaller banks reported
surcharging and a greater percentage of the large banks reported that
they began surcharging during the past year; (7) GAO's survey showed
that, from the end of 1995 to February 1, 1997, there was an estimated
320-percent increase in the number of ATMs that had surcharge fees; (8)
in addition, according to GAO's survey, the average surcharge fee had
more than tripled since the end of 1995 to reach an average of $0.62 for
all banks; (9) the average surcharge fee for large banks was $0.71
compared to $0.48 for smaller banks; (10) the average reported surcharge
fee for ATMs with surcharges was $1.14 in 1997; (11) according to the
four large nonbank ATM operators with whom GAO spoke, the number of ATMs
they owned remained about the same in the past year; (12) for the four
nonbanks, the average surcharge increased from $0.12 in December 1995 to
$0.32 as of February 1, 1997; and (13) the average fee for the three
nonbanks that surcharged increased from $0.51 to $0.71 during the same
period.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-97-90
     TITLE:  Automated Teller Machines: Banks Reported That Use of 
             Surcharge Fees Has Increased
      DATE:  05/16/97
   SUBJECT:  Fees
             Financial institutions
             Computer networks
             Price adjustments
             Electronic funds transfer
             Savings and loan associations

             
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Cover
================================================================ COVER


Report to the Chairman, Committee on Banking, Housing, and Urban
Affairs, U.S.  Senate

May 1997

AUTOMATED TELLER MACHINES - BANKS
REPORTED THAT USE OF SURCHARGE
FEES HAS INCREASED

GAO/GGD-97-90

Automated Teller Machine Surcharge Fees

(233511)


Abbreviations
=============================================================== ABBREV

  ATM - Automated teller machine
  PIN - Personal identification number

Letter
=============================================================== LETTER


B-275468

May 16, 1997

The Honorable Alfonse M.  D'Amato
Chairman, Committee on Banking,
 Housing, and Urban Affairs
United States Senate

Dear Mr.  Chairman: 

This report responds to your request that we gather information on
fee-charging practices of banks and thrifts (hereafter referred to as
banks) with regard to automated teller machines (ATM) used by
individuals who do not hold accounts at the institutions owning the
ATMs.  Banks and other ATM owners may charge a fee to non-account
holders who use the owners' ATMs; this fee is called a surcharge or
access fee.  According to congressional testimony by senior industry
officials, between 1990 and April 1996, 15 states passed laws or
issued regulatory rulings prohibiting ATM networks from banning ATM
surcharges.  With other states considering similar actions, the two
primary national networks changed their policy in April 1996 from
prohibiting surcharges to allowing their ATM operator members
nationwide to assess surcharges. 

You were interested in obtaining statistical information on banks'
current practice of surcharging.  As agreed with your office, the
objectives of this report are to summarize our survey data on the (1)
number of banks that operate ATMs, and (2) number of these banks that
surcharge non-account holders and the amounts of the surcharges
assessed. 

To answer the objectives, we conducted a statistically representative
survey of 246 randomly selected banks throughout the United States. 
All the estimates presented in this report are based on responses to
this survey, which had a response rate of 87 percent.  The sample
size and composition were determined by the need to obtain a high
response rate, as well as by time constraints.  To obtain as much
information as possible about ATMs and surcharges, we sampled large
banks at a higher rate than other banks, because large banks, on
average, operate more ATMs.  Consequently, the estimates for large
banks are more precise, i.e., the estimates have smaller sampling
errors.  While we also report the less precise estimates with their
sampling errors, we do not make comparisons that are not supported by
the survey results. 

As agreed with your office, we did not include credit unions or
nonbank ATM operators in our survey.  Through interviews, we did
gather comparable information from four large nonbank ATM operators. 
We also did not attempt to determine the effect surcharge fees have
on the deployment of new ATMs.  Finally, this study was not intended
to address whether ATM operators are adequately disclosing
information on ATM fees to customers. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

On the basis of our survey, we estimate that, as of February 1, 1997,
about three-fourths of all banks in the United States operated ATMs. 
Of the estimated 8,600 banks that operated ATMs as of February 1, an
estimated 8,000 had ATMs as of December 31, 1995.\1

In addition, we estimate that, as of February 1, 1997, banks operated
about 119,000 ATMs, an increase from the 89,000 ATMs they operated at
the end of 1995.  Over this period, the reported increases in ATM
deployment occurred at both on-premise (i.e., at banking facilities)
and off-premise locations (i.e., at locations not at a banking
facility). 

About one-third of the banks that operated ATMs reported that they
imposed surcharges on non-account holders who used their machines. 
More of the large banks than smaller banks reported surcharging and a
greater percentage of the large banks reported that they began
surcharging during the past year.  Our survey showed that, from the
end of 1995 to February 1, 1997, there was an estimated 320-percent
increase in the number of ATMs that had surcharge fees, from about
15,400 to about 64,400.  For the ATMs with surcharges, the most
typical fee was $1.00.  The maximum surcharge fee reported in our
survey was $3.00. 

Actual surcharge fees tend to occur in 50-cent increments, e.g.,
$1.00, $1.50, $2.00.  However, a commonly used measure of surcharge
fees throughout the industry is a simple average.  We calculated the
average surcharge fee in two ways:  for all ATMs, including those
with no surcharge fees, and for only those ATMs with surcharges.  We
estimated that the average surcharge fee had more than tripled since
the end of 1995, from $0.17 to $0.62 in 1997 for all ATMs operated by
banks, including those with no surcharge fees.  The average reported
surcharge fee calculated for only those ATMs with surcharges was
$1.14 in 1997, not a significant increase from $0.99 in 1995. 

According to the four large nonbank ATM operators with whom we spoke,
the number of ATMs they owned remained about the same in the past
year.  Three of the four nonbanks reported surcharging.  The average
fee for the three nonbanks that surcharged increased from $0.51 in
December 1995 to $0.71 as of February 1, 1997. 


--------------------
\1 The estimates are unbiased, but the increase in the number of
banks that operated ATMs is not statistically significant at a 95
percent confidence level.  In other words, on the basis of our
sample, the possibility that there was not an increase in the number
of banks that operated ATMs is greater than 5 percent. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Studies done by financial industry groups such as the American
Bankers Association and the Bankers Roundtable report that ATMs can
perform many of the tasks bank tellers perform, and ATMs are
typically available 24 hours a day.  The studies report that ATMs are
most often used by consumers to make cash withdrawals from personal
checking, savings, and other deposit accounts.  Some ATMs also enable
consumers to carry out financial transactions, such as obtaining
product information, making loan payments, purchasing insurance and
investment products, accessing lines of credit, and making payments
on credit cards. 

Consumers can gain access to ATMs by obtaining an electronic fund
transfer card from a bank.  The card contains a magnetic stripe that
is electronically encoded with a cardholder number.  The financial
institution is to maintain an individual record on each consumer
issued a card.  The record contains the encrypted personal
identification number (PIN) needed to use the card.  It also reflects
the accounts that can be accessed with the card, usage limits, and
the card's expiration date. 

The ATM transaction begins when the consumer inserts the card into
the ATM.  Generally, the consumer enters the PIN; selects the
transaction to be performed, such as a cash withdrawal from the
consumer's checking account; and enters the dollar amount of the
transaction.  The terminal sends this information to a processor that
determines the institution that issued the card to the consumer.  The
processor's host computer verifies the PIN for the cardholder and
checks to see that the transaction and, in the case of a cash
withdrawal, the dollar amount requested are within the usage limits
established for that particular consumer and that funds are
available.  If the transaction conditions are met, the processor
sends a message to the ATM terminal to complete the transaction
(e.g., dispensing cash to the consumer).  At the card-issuing
institution, the transaction is posted to the consumer's account and
reflected in the monthly statement. 

Banks have access to ATM networks that link their ATMs and computer
systems so that depositors from any member of the network can access
their accounts through any network bank's ATM.  There are regional,
national, and international networks.  These networks enable ATM
users to obtain ATM services over a much wider geographic area than
that covered by their own banks' offices or ATMs. 

There are fees associated with using ATMs.  The fees may or may not
be directly passed to the ATM user.  Banks may charge their own
account holders for using their ATMs; however, a majority of the fees
are associated with consumers using ATMs operated by other banks in
the network system.  There can be up to three different fees charged
when non-account holders use ATMs not operated by their own banks.  A
switching fee is assessed by the ATM network to the user's home bank
to pay for processing each of its network transactions and to defray
other network operating costs, such as advertising and network
security.  Banks may choose to absorb this fee or pass it to the ATM
user.  An interchange fee may be charged by ATM owners to a
non-account holder's home bank for handling one of its transactions. 
If the home bank passes this fee to ATM users, the Federal Reserve's
Regulation E requires the users' home banks to inform users--normally
when they open an account--that the charges will appear on their bank
statements.  Finally, a surcharge fee (or access fee) may be charged
by ATM owners to ATM users who do not have accounts with them.  For
surcharge fees, ATM owners may charge users' banks, and the banks in
turn pay the fees and then may charge them directly to the users'
accounts.  The national networks require that, if the fee is passed
to the user, the charge appear on the receipt at the cash machine and
again on the user's bank statement. 


   MOST BANKS REPORTED OPERATING
   ATMS
------------------------------------------------------------ Letter :3

From our statistical analysis of the survey responses, we estimate
that, as of February 1, 1997, about 75 percent (ï¿½ 14 percent sampling
error) of banks in the United States operated ATMs.  Of the
approximately 8,600 (ï¿½ 1,700) banks that reported operating ATMs as
of February 1, about 8,000 (ï¿½ 1,800) had ATMs as of December 31,
1995.\2 Our survey results show that for smaller banks--those with
assets of less than $1 billion--69 percent (ï¿½ 16 percent) had at
least one ATM in 1995, while 75 percent (ï¿½ 15 percent) had at least
one ATM in 1997.  The percentage of medium and large banks--those
with assets of $1 billion to $10 billion and those with assets of
over $10 billion, respectively--reporting at least one ATM remained
about 90 percent. 

Although large banks account for about 1 percent of the total number
of banks that reported operating ATMs, they operate a larger
percentage of the total number of ATMs in the United States.  As of
February 1, 1997, banks operated an estimated 119,000 ATMs in the
United States, a statistically significant increase from the
estimated 89,000 ATMs they operated at the end of 1995.  According to
our survey results, as of February 1, 1997, the large banks operated
37 percent of the total ATMs, and the smaller banks operated 32
percent, with medium banks making up the remainder.  See figure 1. 

   Figure 1:  Percentage of ATMs
   Reported by Large, Medium, and
   Smaller Banks, 1997

   (See figure in printed
   edition.)

Source:  GAO analysis of survey results. 

For banks that operate ATMs, large banks reported a median of 346
ATMs in operation, compared to 2 for the smaller banks.  Our analysis
showed that about 98 percent of these large banks had 26 or more ATMs
in operation.  As indicated in figure 2, 60 percent (ï¿½ 16 percent) of
banks with ATMs had three or fewer.  In our survey, we found that
these ATM operators were all smaller banks. 

   Figure 2:  Percentage of Banks
   That Reported Operating ATMs,
   by Number of ATMs, 1997

   (See figure in printed
   edition.)

Note:  The estimates are subject to sampling errors of up to ï¿½ 16
percent. 

Source:  GAO analysis of survey results. 

Banking officials' responses indicated that between the end of 1995
and February 1, 1997, more of the smaller banks began operating ATMs
at both on- and off-premise locations, rather than only at on-premise
locations.  The estimated percentage of smaller banks with both on-
and off-premise ATMs was 31 percent (ï¿½ 17 percent) in 1995 and 46
percent (ï¿½ 19 percent) in 1997, while about 95 percent of the large
banks continued to operate ATMs both on- and off-premises. 

Banks indicated that non-account holder transactions across all of
their ATMs were 132 million (ï¿½ 38 million) during January 1996 and
167 million (ï¿½ 64 million) during January 1997.  The average number
of these transactions per ATM was 1,624 (ï¿½ 566) in January 1997,
which was not a statistically significant decrease from the 1,774 (ï¿½
452) in January 1996.\3 Our analysis indicated that 37 percent (ï¿½ 16
percent) of the banks experienced decreases in the number of
non-account holder transactions per ATM during the same period, while
63 percent (ï¿½ 16 percent) had an increase in their average per ATM
non-account holder transactions.  We did not attempt to evaluate the
impact of surcharge fees on the change in transactions for these two
time periods.  To do so would have required us to look at factors
such as increases in available ATMs, seasonal changes, changes in
consumers' shopping patterns, and other factors that may influence
consumers' reactions to surcharges. 

We could not address the ATM surcharging practices followed by
nonbank ATM operators because of the lack of complete data on nonbank
operators of ATMs.  However, to obtain an indication of nonbank
surcharging practices, we obtained surcharge information from four
nonbanks that operated ATMs in retail locations.  Industry officials
told us that these four nonbanks accounted for approximately 80
percent of nonbank ATM operations. 

According to the four large nonbank ATM operators with whom we spoke,
overall ownership at these large nonbanks increased from 8,527 ATMs
to 8,564 between December 31, 1995, and February 1, 1997.  Three of
the four nonbanks said that the number of ATMs they owned increased
by less than 4 percent from December 31, 1995, to February 1, 1997. 
An official from the other nonbank told us it had had a 15-percent
decrease in the number of ATMs it was operating.  The official told
us that the decrease was attributed to a lost contract. 


--------------------
\2 Throughout this report, December 1995 estimates are based on the
responses of banks we surveyed in February 1997. 

\3 These averages were calculated from reported transaction volume
and number of ATMs.  Not all banks reported transaction volume. 


   BANKS REPORTED USE OF SURCHARGE
   FEES HAS INCREASED
------------------------------------------------------------ Letter :4

On the basis of our survey, we estimate that 2,900 (ï¿½ 1,400) of 8,600
banks that operated ATMs as of February 1, 1997, imposed surcharges,
while 1,600 (ï¿½ 1,100) of these banks imposed surcharges in 1995. 
Currently, 57 percent of large banks are surcharging, an increase
from the 20 percent that were doing so in 1995.  Thirty-two percent
(ï¿½ 16 percent) of the smaller banks were surcharging in 1997, while
20 percent (ï¿½ 14 percent) of these banks imposed a surcharge in 1995. 

The reported number of ATMs that have surcharge fees has also
increased since 1995.  Our survey showed that, from the end of 1995
to February 1, 1997, there was an almost 320-percent increase in the
number of ATMs that had surcharge fees--from about 15,400 (ï¿½ 6,500)
to about 64,400 (ï¿½ 16,700).\4 The increase included newly deployed or
acquired ATMs, as well as old ATMs that previously did not have a
surcharge fee. 

Banks indicated that both on-premise and off-premise ATM surcharging
has increased since 1995.  A higher percentage of the large banks (53
percent) reported that they imposed surcharge fees for use of at
least some of their on-premise ATMs than did smaller banks (30
percent ï¿½ 17 percent).  In addition, 57 percent of the large banks
reported that they imposed surcharge fees for use of their
off-premise ATMs, and 32 percent (ï¿½ 18 percent) of the smaller banks
surcharged for off-premise ATMs. 


--------------------
\4 While about one-third of banks reported surcharge fees, these fees
were charged for the use of about 54 percent of the ATMs in service
as of February 1, 1997. 


      THE AVERAGE REPORTED ATM
      SURCHARGE FEE HAS INCREASED
---------------------------------------------------------- Letter :4.1

According to our survey, the average ATM surcharge fee\5 has more
than tripled since the end of 1995.  The average surcharge fee
reported by banks was $0.62 (ï¿½ $0.10) as of February 1, 1997, which
was an increase from the average fee of $0.17 (ï¿½ $0.08) assessed in
1995.  As shown in figure 3, the average surcharge fee reported by
the large banks was $0.71 (ï¿½ $0.11) in 1997, while the fee assessed
by the smaller banks was $0.48 (ï¿½ $0.23).  The maximum ATM fee
reported in our survey was $3.00.  The average surcharge fee reported
by banks that imposed a surcharge fee was $1.14 (ï¿½ $0.06) in 1997,
while the average fee assessed in 1995 was $0.99 (ï¿½ $0.12).\6

   Figure 3:  Average ATM
   Surcharge Fees Reported by
   Large, Medium, and Smaller
   Banks, 1995 and 1997

   (See figure in printed
   edition.)

Note 1:  The average ATM surcharge fees were calculated for all ATMs,
including those which have no surcharges. 

Note 2:  Although some of the sampling errors were much greater than
ï¿½ 10 percent, all of the differences within the three size groups
were statistically significant. 

Source:  GAO analysis of survey results. 

Our survey showed that the number of ATMs that have surcharge fees of
$1.00 or more has increased since 1995.  (See figure 4.) As indicated
in table 1, this increase has occurred for large and medium banks.\7

   Figure 4:  ATM Surcharges
   Reported by Banks, 1995 and
   1997

   (See figure in printed
   edition.)

Source:  GAO analysis of survey results



                                Table 1
                
                    Percentage of ATMs With Reported
                Surcharges, by Bank Size, 1995 and 1997


Surcharge                 1995    1997    1995    1997    1995    1997
----------------------  ------  ------  ------  ------  ------  ------
$0.00                      84%     40%   76%\a   41%\a     87%   57%\a
$0.01 -$0.99                 1       3       7       5       2       1
$1.00                       14      31      12    38\a      10    31\a
$1.01 -$1.99                 1    25\a       1      14       0       9
$2.00 or more                0       0       3       2       1       1
----------------------------------------------------------------------
Note:  Sampling errors were not calculated for estimates of less than
10 percent.  Totals may not add to 100 percent because of rounding. 

\a Sampling error exceeded ï¿½ 10 percent. 

Source:  GAO analysis of survey results. 

As of February 1, 1997, three out of the four large nonbanks said
that they imposed surcharge fees.  As reported by these nonbanks, the
surcharge fee had remained the same since the end of 1995 for two
nonbanks that surcharge, while one had doubled its fee.  The average
surcharge fee for the ATMs operated by the four nonbanks increased
from $0.12 in December 1995 to $0.32 as of February 1, 1997.  The
maximum surcharge fee reported to us by these nonbanks was $1.00. 
The three nonbanks that surcharge reported that the average surcharge
fee was $0.71 as of February 1, 1997, an increase from $0.51 at the
end of 1995. 


--------------------
\5 We calculated every average surcharge fee on a per ATM basis.  The
average surcharge fee calculated for all ATMs included ATMs with a
surcharge fee of $0.00. 

\6 The average reported surcharge fee imposed by banks that
surcharged was about $1.14 for both on- and off-premise ATMs in 1997. 

\7 The increase for smaller banks was not significant at a 95 percent
confidence level. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :5

Our objectives were to provide summary data on the number of banks
that operate ATMs, the number of banks that levy surcharges against
non-account holders who use the banks' ATMs, and the amounts of the
surcharges assessed.  We also agreed to use statistical sampling
techniques to ensure that the information gathered on the use of
surcharge fees would represent practices in the banking industry as a
whole.  The sampling procedures are discussed in detail in appendix
II. 

We sent a questionnaire (see appendix I) to a sample of banks to
obtain information on ATMs they operated on February 1, 1997, and
December 31, 1995; surcharge fees assessed non-account holders using
these ATMs for these two dates; and ATM transaction volume data
during January 1996 and February 1997.  We selected the December 1995
date to obtain data prior to the national ATM networks' lifting of
the surcharge ban in April 1996, and the February 1997 date to obtain
data several months after the two national ATM networks lifted their
bans on surcharges. 

We selected our sample from a universe of all banks that we
identified through data collected by the bank regulatory agencies. 
Our stratified random sample was designed to provide unbiased point
estimates of all variables.  However, the sample size of 246 banks
was not large enough to detect significant differences in some of the
estimates for subgroups within the sample, or to draw certain
conclusions about comparisons between 1995 to 1997.  The sample size
was dictated by time and resource constraints because, in our
judgment, the most significant threat to the study's validity was a
low response rate.  To minimize this threat, we telephoned every bank
in our sample to determine the appropriate respondent at each bank
before we mailed the questionnaires. 

In this study, we did not address (1) whether surcharge fees affect
efficiency and competition within the financial services industry,
(2) the reasons for the deployment of ATMs, and (3) consumer
protection and disclosure issues.  We did not attempt to evaluate the
impact of the surcharge fees on the number of transactions completed
at each of the banks' ATMs.  To do so would have required us to look
at numerous factors, such as changes in the number of ATMs available
to consumers, seasonal factors, and changes in consumer behavior. 

Further, this study does not fully address the ATM surcharging
practices followed by nonbank ATM operators, because of the lack of
complete data on these operators of ATMs.  However, to obtain an
indication of nonbank practices in ATM surcharging, we obtained
surcharge information from four nonbanks that operate ATMs in retail
locations.  Industry officials told us that these four nonbanks
account for approximately 80 percent of nonbank ATM operations. 

We did our work between December 1996 and April 1997 in accordance
with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :5.1

As agreed with your office, unless you announce the contents of this
report earlier, we plan no further distribution until 30 days after
the date of this letter.  At that time, we will send copies of this
report to the Ranking Minority Member of your Committee, the Chairmen
and Ranking Minority Members of other interested congressional
committees, individual members, federal agencies, and the public on
request. 

This report was prepared under the direction of Susan S.  Westin,
Assistant Director, Financial Institutions and Markets Issues.  Other
major contributors are listed in appendix III.  Please contact either
Ms.  Westin on (202) 512-3655 or me on (202) 512-8678 if you have any
questions about this report. 

Sincerely yours,

Thomas J.  McCool
Associate Director
Financial Institutions
 and Markets Issues


SURVEY INSTRUMENT USED TO COLLECT
DATA FROM A SAMPLE OF BANKS

=========================================================== Appendix I



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix II

Our objectives were to provide summary data on the number of banks
that operate ATMs, the number of banks that levy surcharges against
non-account holders who use the banks' ATMs, and the amounts of the
surcharges assessed.  As agreed with your office, we focused our work
on U.S.  banks. 

To determine the extent of bank ATM operations, surcharging, and
transaction volume, and to identify changes in these parameters
across a time period, we collected data for various time periods
between December 31, 1995, and February 1, 1997.  We selected these
dates to obtain information prior to and after two national ATM
networks (CIRRUS, PLUS) lifted their ban on surcharging.  We
conducted a mail questionnaire survey of a random sample of banks
that was statistically representative of the universe of the entire
banking industry. 

From the 11,553 active banks and thrifts with individual charters
that we identified from a database of the September 1996 Federal
Financial Institutions Examination Council's Call Reports and Office
of Thrift Supervision's Thrift Financial Reports, we drew a random
sample of 246 banks, allocated across 11 strata defined by total
asset size.  We did not assess the quality of the database. 

We contacted each of the 246 institutions in our sample by telephone
to determine whether it was currently an active bank eligible for our
survey, and if so, whether it operated any ATMs as of February 1,
1997.  For banks reporting no ATMs, this information constituted a
complete response.  For banks that indicated that they had at least
one ATM, we then identified the most appropriate respondent and
mailed that person a questionnaire requesting the number and type of
ATMs operated, access or surcharge fees assessed non-account holders
at each ATM, and the total number of non-account holder ATM
transactions.  We asked each bank to enumerate its ATMs and
corresponding surcharges as of December 31, 1995, and February 1,
1997, and we further asked the banks to provide the non-account
holder transaction volume data for the months of January 1996 and
January 1997.  We selected those dates to obtain ATM operation data
for time periods before and after two national ATM networks (CIRRUS,
PLUS) lifted their ban on surcharges.  A copy of the questionnaire is
included in appendix I. 

We mailed the questionnaires in mid-February 1997 and asked the banks
to respond by fax.  At the end of February and the beginning of
March, we telephoned institutions that had not yet responded.  While
some of those banks ultimately returned questionnaires by mail or
fax, we also conducted telephone interviews to collect questionnaire
data from others.  When we closed the survey field period in late
March of 1997, 209 of the 240 eligible banks in our original sample
(87 percent) had provided at least partial responses.  Of the 209
usable responses, 30 were from banks without ATMs.  The remaining 179
responses from banks with ATMs were weighted to represent the total
estimated number of banks with ATM machines in each stratum.  We did
not verify information provided by the survey respondents.  Table
II.1 lists, by bank asset size, the strata we used to categorize the
population of banks, as well as the disposition of the sample of
banks that we drew for participation in our survey. 



                                    Table II.1
                     
                        Disposition of Bank Survey Sample


                                                          No    Usable
Bank      Sample  Populatio          Ineligibl  Refusa  respon  respon  Response
size      strata          n  Sample        e\a    ls      se      se     rate\b
--------  ------  ---------  ------  ---------  ------  ------  ------  --------
Large     Over           85      84          1    5       12      66      80%
 banks     $10
           billi
           on
Medium    Over           22      12          0    0       0       12      100
 banks     $8
           billi
           on,
           up to
           $10
           billi
           on
          Over           33      14          0    1       1       12       86
           $6
           billi
           on,
           up to
           $8
           billi
           on
          Over           64      18          2    2       1       13       81
           $4
           billi
           on,
           up to
           $6
           billi
           on
          Over          132      22          1    1       1       19       90
           $2
           billi
           on,
           up to
           $4
           billi
           on
          Over          224      19          0    2       0       17       89
           $1
           billi
           on,
           up to
           $2
           billi
           on
Smaller   Over          414      17          1    1       0       15       94
 banks     $500
           milli
           on,
           up to
           $1
           billi
           on
          Over          573      13          1    0       2       10       83
           $300
           milli
           on,
           up to
           $500
           milli
           on
          Over        1,451      19          0    0       0       19      100
           $150
           milli
           on,
           up to
           $300
           milli
           on
          Over        1,797      11          0    1       0       10       91
           $90
           milli
           on,
           up to
           $150
           milli
           on
          $90         6,758      17          0    1       0       16       94
           milli
           on or
           less
================================================================================
Total                11,553     246          6    14      17     209      87%
--------------------------------------------------------------------------------
\a Not a depository institution, no longer in business, merged, or
otherwise closed. 

\b Response rate calculated as the number of banks completing usable
questionnaires divided by the number of eligible banks in the sample
(original sample less ineligibles). 

Source:  GAO sampling and survey results. 

The survey estimates printed in this report are projected to the
entire population of U.S.  banks from which our sample was drawn. 
While we sampled relatively more of the institutions with a large
amount of assets than institutions with a small amount of assets in
order to develop precise estimates of ATM-related activity, each
completed questionnaire was assigned a mathematical weight that made
its contribution to the overall results proportional to the number of
banks of similar asset size in the population.  However, because we
surveyed only a sample of banks, each of the survey estimates in this
report has a sampling error, which is a measure of the precision with
which the estimate approximates the true, unknown population value. 
All of the sampling errors for our survey estimates are no larger
than plus or minus 10 percent at the 95 percent confidence level,
unless otherwise noted. 

In addition to the reported sampling errors, the practical
difficulties of conducting any survey may introduce other types of
"nonsampling" errors.  For example, differences in how a particular
question is interpreted, in the sources of information that are
available to respondents, or in the types of organizations that do
not respond can introduce unwanted variability into the survey
results.  While we did not verify the survey results, we included
steps in the data collection and data analysis stages to minimize
nonsampling errors.  While designing the questionnaire, we solicited
expert opinion on the wording and structure of our questions, and we
pretested the survey instrument with several banks.  Follow-up
telephone calls were made to nonrespondents, and inconsistent answers
were identified during questionnaire editing and followed up on.  A
number of keypunched records were verified during data entry, and
computer analyses were performed to identify additional
inconsistencies or other indications of errors.  All computer
analyses were checked by an independent analyst. 

We also attempted to determine whether banks that responded were
significantly different from the few that did not.  Based on the
information we collected during our telephone precontacts with the
banks, we concluded that those banks that did not respond to the
subsequent mail survey (including those that refused) had a higher
number of estimated ATMs, on average, than did the banks that
responded.  While this suggests that our survey results
underrepresent banks with a large number of ATMs, we feel that any
potential bias is limited by the small number (31) of nonrespondents
involved. 

While we collected ATM data before and after the national networks
lifted their ban on surcharges, it is not possible to attribute all
of the change we observed to that event.  Any number of factors that
we did not measure could have influenced bank ATM deployment
activity, surcharge policy, and ATM use by non-account holders.  We
did not attempt to evaluate the impact of the surcharge fees on the
change in transactions.  To do so would have required us to look at
numerous factors, such as changes in the number of ATMs available to
consumers, weather, and changes in consumer behavior (including
changes in purchasing patterns).  We also did not address whether
surcharge fees affect efficiency and competition within the financial
services industry, the deployment of ATMs, and consumer protection
and disclosure issues. 

Further, this study does not fully address the ATM surcharging
practices followed by nonbank ATM operators, because of the lack of
reliable public data on the universe of nonbank operators of ATMs. 
However, we interviewed officials from several nonbank organizations
that operated a large number of ATMs (100 or more each) to get some
idea of the surcharging practices of nonbank ATM operators.  We also
reviewed the results of several studies of bank and nonbank ATM
operations conducted by industry associations and private consulting
firms. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

GENERAL GOVERNMENT DIVISION

Lamont J.  Kincaid, Evaluator-in-Charge
Tamara E.  Cross, Senior Evaluator
Nancy M.  Eibeck, Evaluator
James M.  Fields, Senior Social Science Analyst
George H.  Quinn, Jr., Social Science Analyst
Carl M.  Ramirez, Senior Social Science Analyst
Darleen A.  Wall, Evaluator
Edward S.  Wroblewski, Senior Evaluator

*** End of document. ***