Listen to this article

Banks pick up the tab when customers use rivals’ cash machinesUse the automated cash machine (ATM) at a bank other than your own and you can be hit with two transaction fees. One comes from the rival bank whose ATM you use while the other is what your own bank charges to process the transaction.

But a growing number of banks in New Jersey’s highly competitive market are promising to refund the ATM fees that other banks charge, and to waive their own processing fees as well. By doing so, the banks hope to pull in more revenue than they lose by refunding and waiving fees.

“Generally speaking, banks are looking at their fee structures from a marketing angle and making their decisions accordingly,” says Tim Doherty, vice president and director of communications for the Trenton-based New Jersey Bankers Association.

To help make no-fee policies pay off, many banks tie them to specific bank accounts. “In such cases it tends to be an interest-bearing account that requires a much higher balance,” says Greg McBride, senior analyst at Bankrate.com, a Web-based market research firm. “You can say [no-fee deals] come with a string attached, but that string is actually a pretty thick rope.”

McBride calls waiving and refunding fees “a great competitive tool” that “is designed as much to retain your own customers as it is to attract new ones.”

ATM fees are a lucrative source of bank revenue. According to Bankrate.com, ATM fees totaled an estimated $4.2 billion nationwide in 2006. Bankrate.com says the average total cost for customers who use a rival bank’s ATM is $2.89 per transaction, including the rival bank’s charge and the internal processing fees charged by the customer’s own bank.

Among banks offering free ATM use is Toms River-based OceanFirst Bank, which in November began reimbursing ATM fees for its Simply Great Checking customers who use other banks’ ATMs. The bank also waives fees it normally charges for processing ATM transactions for its own Simply Great Checking customers.

Simply Great Checking provides unlimited rebates of outside bank ATM fees, free checking and a Visa check card with no annual fee. To qualify, customers must maintain a $2,500 balance.

“By providing this service to our customers, we believe that we are breaking down obstacles for them,” says Vito Nardelli, COO and executive vice president of OceanFirst Bank. “We’re giving them the ability to choose a local bank that gives them good service, but also offers them worldwide ATM access without the burden of fees that other banks charge.”

Cherry Hill-based Commerce Bank has been waiving or refunding ATM charges for any customer with $2,500 or more on deposit at one of its 148 bank branches. The policy has been in effect since March 2005.

Pittsburgh-based PNC Bank, which operates about 300 branches in New Jersey, in September made free ATM access part of its benefits for customers with certain types of accounts, including those who maintain a monthly balance of $2,500 in their free checking accounts.

Banks coming into the state for the first time can use the no-fee policy as a tactic to win business away from established banks. Maine-based TD Banknorth, which acquired United Bancorp in Mahwah last year, offers New Jersey customers “No Fee” ATM cards on all accounts and without requiring a minimum balance. The bank has 100 Garden State branches and refunds charges incurred by customers who use other banks’ ATMs.

Tom Dyck, executive vice president and director of marketing for TD Banknorth, says offering ATM cards without fees was designed to compete with banks already in residence. “The easiest way to stand out,” says Dyck, “was to make our ATMs free.”

Offering another kind of free ATM service is Provident Bank based in Baltimore, which has 75 branches in New Jersey. In November the bank joined the surcharge-free Allpoint ATM Network, which operates 900 ATMs in Target, Wal-Mart, Walgreens and other stores in New Jersey and more than 32,000 retail locations nationwide.