Felix Salmon complains about a pricing innovation I had not yet heard of: ATM’s working off a percentage fee rather than a flat fee. Or, as these things generally go, whichever fee is greater. In the case he cites, it’s $3 or 3%.
Look, I’m not going to get all market-worshipper on this, but as far as price gouging goes, this is far less of a big deal than what we put up with at sports arenas, amusement parks, and so on. If I don’t like Holiday Inn’s charge, I really, genuinely can go elsewhere. Maybe this will take up like wildfire and all of them will be doing this and so at some point in the future I won’t have a choice.
Even then, though, the pricing model itself doesn’t seem particularly outrageous. In order to trip up to the percentage-based fee, that means that you have to be extracting more than $100. If you’re extracting more than $100, maybe you need to find the nearest branch of your bank. If anything, I think this fee is to guide people to do just that. Extracting large sums from an ATM machine actually does cost them more money. It means more regular restocking. So I can very easily see why they would be cool with people taking out $40, but wanting those who intend to take more out to think twice, go elsewhere, or pay extra.
Of course it does not cost them $3 per small transaction or an extra $3 for a transaction of $200. But the ATM, the security involved, and restocking all do cost money. Is Holiday Inn making money off the ATM? I would imagine so. Maybe it would be better if they provided it as a cost-neutral convenience. Maybe we should go to hotels that do just that.
But really, there has never been a better time for a consumer as far as this stuff goes. More and more places offer cash-back on purchases to the point that I almost never use an ATM anymore (not even my own bank’s). But more to the point, we need cash a lot less than we used to. $100 in cash goes a lot further than it used to with credit card swipers everywhere. And if there is one benefit to the increasing consolidation of banks, it’s that it’s more likely your bank has an ATM nearby just in case you happen to need one. The last couple of times I did use an ATM it was while traveling. A quick google and a quick drive and no ATM fees at all.
Now, maybe it’s not worth it to get in your car and drive for ten minutes in order to save $3 or $6. If so, that only suggests that the Holiday Inn’s convenience charge is reasonable.
Fortunately my grocery store has a charge-free Credit Union ATM. The store limits my cash back to $40, but the ATM is right by the door.
Operating an ATM is quite profitable, as it turns out — the fees generated are well in excess of operating costs. With that said, the issue is not whether the banks or convenience store operators or whoever makes a profit. The issue is whether they are charging a price that consumers, on the whole, are willing to pay for the convenience of getting cash when and where they want it. My only caveat is that a consumer ought to know what the cost is before she pays it.