One of the most expensive ways for Australians to access their own money is by using an automatic teller machine (ATM) that is not provided by their own bank. In most cases, third-party ATMs charge $2 for every transaction, including checking one's account balance. In other words, $2 is the price consumers pay every time they are 'disloyal' to their bank.

In April 2009, the Reserve Bank of Australia (RBA) put in place a package of reforms to the ATM system. The reforms ensured that customers would be charged directly by ATM owners, rather than being charged indirectly through their financial institution as in the past. The new rules also required that ATMs display the cost before customers confirm the transaction. One of the stated objectives of the reforms was to place 'downward pressure on the cost of ATM withdrawals'. To date, however, third-party ATM fees typically remain at $2 or higher. In the RBA's words, the $2 fee has become a 'benchmark'.

There is substantial public opposition to ATM fees. Survey results indicate that the great majority of Australians (82%) believe it is unfair for banks to charge $2 to use their ATMs. Survey findings also corroborate the Reserve Bank's claim that consumers have changed their behaviour in order to avoid paying third-party ATM fees now that they are more aware that such fees exist.

In the year following the 2009 reforms, the use of third-party ATMs fell 18 per cent, delivering consumers savings of some $120 million. But because ATM fees typically remain at $2, virtually all these savings stem from behaviour change on the part of consumers rather than lower prices, even though behaviour change was never an explicit objective of the RBA's reforms. Altogether Australians are still paying an estimated $753 million per year on third-party ATM fees.

The increased transparency of ATM fees may have led to another form of behaviour change which is not necessarily in the best interests of consumers. Two in three survey respondents (66%) reported paying for purchases with a credit card to avoid ATM fees, but a substantial minority (18%) do so without then paying off their credit card in full. These people then end up paying high rates of interest on their purchases, effectively negating any savings they might have made on ATM fees and in the process delivering additional revenue to credit card providers. The perception that using credit cards can help reduce ATM fees may therefore serve to exacerbate the problems with personal debt that many Australians experience.

Survey results also show that young people bear a disproportionate burden of ATM fees. One in four survey respondents (26%) reported paying a $2 ATM fee at least once in the past week, but some 40% of those aged between 18 and 24 years paid an ATM fee. People under the age of 25 typically earn less than those who have been in the workforce for longer, meaning that ATM fees would constitute a much higher proportion of income for younger people than for other ATM users. Given that the use of third-party ATMs declines with age it is possible that children with a bank account are also paying a higher than average share of ATM fees. Similarly, people on low incomes are likely to pay more in ATM fees as a proportion of their incomes than people who are financially better off.

Although reforms to the ATM system have not led to lower prices across the board, they have resulted in other changes. The effective abolition of indirect fees (known as 'interchange fees') has meant that owning ATMs is now a much more profitable endeavour than it used to be. The number of ATMs available to consumers has grown strongly since the reforms. In fact, the provision of ATMs is now so profitable that rents for ATM sites have been rising, and investors can now 'buy' one or more ATMs in return for a guaranteed revenue stream.

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