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Last Updated: Monday, 20 September, 2004, 22:58 GMT 23:58 UK
Cash machine charges 'escalate'
A person using a cash machine
By the end of 2006, free machines could be rare
The spread of fee-charging cash machines is threatening the UK's free ATM network, the Nationwide building society has warned.

Nationwide said cash machine charges were now costing consumers more than 60m a year.

Five years ago virtually all cash machines were free, but more than one in every three machines now charge.

During the past six months the number of ATMs that charge has risen by 40% from around 13,000 to 18,500, it said.

At risk

If the trend continues, Nationwide predicts that there could be more fee-charging automatic tills than free ones by the end of 2006.

The vast majority of cash machines in the UK are part of the Link network
Each year Link calculates the average cost per transaction for all providers. This is called the interchange fee and is the amount each provider is paid for handling transactions for another company's cardholders.
However operators that charge for withdrawals are not entitled to receive this Link interchange fee
Nationwide says that if this agreement ended, banks would forge their own agreements causing confusion among consumers.

Cash machines that charge users typically cost between 1.25 and 1.75 a transaction and they have become increasingly common in newsagents and convenience stores around the UK.

Link, the organisation that runs the cash machine network, ruled last April that fee-charging machines must have either stickers or on-screen messages warning users that they are about to be charged.

Fee-charging cash machines became a focus of discontentment five years ago when, in September 1999, Barclays attempted to charge non-customers a 1 "disloyalty fee" if they used its machines.

The move provoked a barrage of criticism from the press and MPs, and Nationwide threatened to sue Barclays.

As a consequence, withdrawals made from the cash machines attached to major banks have remained free of charge.

Worrying trend

Nationwide now believes the spread of convenience machines has gone too far.

According to its research, more than a quarter of those withdrawing cash from a charging machine have taken out 20 or less.

With a typical charge of 1.50, this equates to an additional charge of 7.5% for making a 20 withdrawal.

Stuart Bernau, Nationwide executive director, said: "This is a serious issue for consumers particularly as machines that were free are being replaced with ones that charge, so it is very easy for people to be caught out and face an unexpected fee."

Free forever?

There is also a long-term concern that the spread of charging tills could jeopardise the existing agreement between major banks.

Royal Bank of Scotland, for example, recently bought Hanco, the largest operator of fee charging cash machines.

Meanwhile, HBOS is in the process of selling 816 cash machines, mainly in petrol stations, to Cardpoint, another fee-charging operator.

Martin Salter, MP for Reading West, who is concerned about the growing number of charging ATMs, said: "Over the longer term, the big worry is that more may follow the lead of HBOS and sell on some of their free machines to charging networks which would have a big impact on consumers across the country."

HBOS, however, told BBC News Online it was not planning on selling off any of its other 2,700 ATMs, based in branches or in town and city centre locations.

The BBC's Brian Milligan
"Machines that charge are springing up in shops, service stations and pubs"

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