Cash Back Feature Cuts Into ATM Use

Industry analysts are saying that the cash back feature that many merchants now offer is partly responsible for a drop in usage of automated teller machines.

A recent Pulse EFT Association study found that U.S. consumers now use their automated teller machine and debit cards for purchases at supermarket checkout stands, gas stations, and other electronic point-of-sale terminals more than twice as often as they withdraw cash at ATMs.

Pulse says that as consumers increasingly use debit cards for purchases, they are taking advantage of the opportunity to get cash back without incurring an additional charge.

Also growing in usage is PIN-based transactions versus signature transactions for check cards. A recent Card Management Magazine study found that PIN-based transactions account for slightly more than 40 percent of all debit transactions but that the numbers are likely to rise because merchants are encouraging PIN use. Both are debit transactions, but fee structures vary. According to Jefferies & Company, industry analysts, retailers pay 60 cents in fees for every signature-based check card purchase vs. 15 cents for each PIN-based purchase.

Meanwhile, some legislators are looking at increased disclosure of debit transaction fees. Unlike fees for use of automated teller machines at other banks, fees for debit purchases are not disclosed before point-of-sale transactions go through. Sen. Charles Schumer (D-N.Y.) said he plans to propose legislation requiring retail stores to notify customers of charges at the time of purchase.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 9, 12/03