Single dip, double whammy: It's a policy so irritating to bank customers that public pressure has forced several states and cities to ban it-and consumer groups are working to get similar bans passed in a dozen other cities.

The "double whammy" is the double charge most customers pay when they withdraw money at the automated teller machine of a bank where they don't have an account. (This is called a "foreign" bank, even though it's in the U. S.)

Stray from home by dipping your card in some other bank's ATM, and the outside bank will hit you with a surcharge, or "access fee," and your own bank will wham your account with an "off-us" fee as well. (also called a "foreign transaction" fee) because you didn't use one of its ATMs.

What's the financial wallop? For the average big-bank customer it's $2.62, according to a study last year by state Public Interest Research Groups (PIRGs)-nonprofit, nonpartisan consumer-advocacy groups. And that $2.62 whammy applies no matter how little money you take out through the foreign ATM-even if it's only $20.

Surcharging is a fairly new development. In the early '80s, banks established shared ATM networks so that clients of one bank could withdraw money from another bank's ATM. Until 1996, the networks opposed surcharging non-account-holders when they used a another bank's machines.

But in April 1996, the PLUS and CIRRUS networks began levying surcharges. Other networks followed suit, and the double withdrawal fee was born. This increase in fees accompanied a sharp rise in the number of ATM machines available in the U.S., from 139,134 machines in 1996 to 227,000 machines 1999.

ATM Infidelity: What's the Penalty?

Consumer groups promptly organized opposition. Among those resisting were the state PIRGs, which have been tracking bank charges since 1993. Their 1999 study, "Big Banks, Bigger Fees," a survey of 526 banks in 33 states, conducted in cooperation with the Consumer Federation of America, spells out the current penalty for ATM infidelity:

* Big banks hit non-account-holders with an average surcharge of $1.35; small banks, an average surcharge of $1.08. * Big banks impose an average fee of $1.27 on their customers when they use another bank's ATM; for smaller banks, the average fee is $1.03.

Who Has the Right to Say No?

So far, attempts to outlaw surcharging have failed in Congress and in many state legislatures around the country. Jon Golinger, consumer program director for the California Public Interest Research Group, ascribes that failure to the power of the banking industry. "The political stranglehold banks have on Congress has stopped progress on this issue for the last three years," he says.

Still, surcharging has been prohibited in Iowa and Connecticut (by the states' banking commissioners); in Santa Monica, CA (by the City Council); and in San Francisco (by a majority of voters).

The surcharge bans have -- so far -- exempted consumers in Iowa and Connecticut from the double withdrawal fee; however, Connecticut ATM-users have just lost that exemption. On December 19, the Connecticut Supreme Court rejected the state's prohibition against surcharging: Banks in that state are now free to levy surcharges, and Fleet Bank and BankBoston, which have merged and which own 30 percent of the state's ATMs, are imposing a $1 surcharge on non-customers.

Although voters in San Francisco banned surcharges last year, banks are still imposing them. A federal judge's injunction has allowed financial institutions in San Francisco to keep on surcharging until their legal challenges to the ordinances have been ruled on in court.

"The issue still resonates," says Golinger of California's PIRG. "Now consumers are attacking the problem from the bottom up." In about a dozen cities across the country-including New York, Los Angeles, San Diego, Chicago, Cleveland, and Portland, OR-anti-surcharge proposals are advancing in city councils.

But is this truth, justice, and the American way? Should customers really be allowed to impose their desire for lower fees-or no fees-on a business by means of the ballot box? Is it right to pressure the government to eliminate ATM surcharges-or should the banks be left alone?

Consumers Outraged

"From Day One, any consumer who has paid this surcharge has seen it as un-American," Golinger says. "Paying this absurdly high amount of money simply to get back your own money has never sat well with consumers. Banks should be paying you to let them keep your money - and in many cases, they used to."

Golinger emphasizes that consumer groups aren't disputing the banking industry's right to impose reasonable transaction fees. "We agree with the banks when they say, 'Shouldn't people pay a convenience fee for using an ATM at a bank that's not their own?' he says. "Yes, we believe they should. But the surcharges are a kind of shell game.

"The fact is, bank customers have always paid a convenience fee for using a foreign ATM. Here's how the system works: When Home Bank's customer uses Foreign Bank's ATM, the foreign bank collects an "interchange" fee of about 50 cents from the home bank, which also pays a 10-cent "switch" fee to its ATM network. The banking industry invented this system to move money around and make sure everyone's cost got covered.

"Most home banks turn around and pass their 60-cent cost-the 50-cent interchange fee plus the 10-cent switch fee-along to their customer on his monthly statement. But, as "Big Banks, Bigger Fees" found, the big home banks charge the customer not 60 cents, but an average of $1.27. That's the 'off-us' fee.

"Foreign banks are now imposing surcharges in addition to the 50-cent interchange fee they get from home banks for the very same electronic transaction. And that 50 cents is more than enough to cover the cost of this electronic transfer," Golinger maintains.

John Hall, a spokesman for the American Bankers Association, the country's largest banking trade group, responds, "The cost of the transaction is not the point. Consumers determine prices in the American free-market system. If they feel prices are too high, they don't buy or use the product. If customers don't buy, prices will come down. In this case, most transactions are free at your own institution's ATMs. So there is a wide variety of choices-many types of transactions you can make."

The "Big Banks, Bigger Fees" report complains, "In 1998 banks recorded nearly $62 billion in profits, an eighth straight record year. According to the Federal Deposit Insurance Corporation (FDIC), deposit account and ATM surcharge fee income are important parts of those increased profits. ... Bankers are punishing low- and middle-income consumers with unjustifiable fee increases while bank profits soar to new records each year."

The high cost of accessing money at foreign ATMs has given anti-surcharge groups an unlikely ally-the Pentagon. In August 1999 the Department of Defense (DOD) proposed, and is now considering, a rule that would ban ATM surcharges on every military base in the country.

Surcharges hit military personnel especially hard. "We move these kids all over the country every two to three years," says DOD spokesman Tom Summers. "Their paychecks are deposited directly into their home bank. When they move, they may be thousands of miles from their home bank's nearest ATM. So to access their money they have to write a check or use another bank's ATM.

"Big Banks, Bigger Fees" suggests one way consumers can cut down on fees, including surcharges. "The best deal, for consumers who qualify for membership, is at member-owned credit unions. Others can find lower fees at small, locally-owned community banks."

To learn how to join the Public Interest Research Groups' fight against ATM surcharges go to www.StopATMFees.com.

Bankers' Response: "Surcharge Bans Will Hurt You!"

The counterargument, from the banking industry, is that outlawing ATM surcharges is likely to boomerang on consumers. In November 1999 the American Bankers Association, the largest bank trade group in the country, released an analysis by Robert E. Litan, an economist at the Brookings Institution, which researches economics. Its findings: Surcharge prohibitions are likely to reduce the number of ATMs that consumers can access and/or raise surcharge fees at non-bank ATMs. Litan's report points out that banks have placed ATMs in convenient locations like hospitals, gas stations, and shopping malls because they were allowed to impose surcharges. According to the report, "ATM growth rates doubled after [surcharges] were allowed in 1996, particularly in low traffic, off-bank-premise locations." Without surcharges, the report declares, ATMs in low-traffic areas are too expensive to operate. If banks abandon ATMs because they can't levy surcharges, "these ATM locations ... probably would be picked up by non-banks."

The surcharge-banning ordinances in Santa Monica and San Francisco do not cover non-bank ATMs-a distinction that bankers deplore. "It's absolutely unfair to financial institutions to make this completely arbitrary distinction," says California Bankers Association spokesman David Burgess. "ATMs not owned by banks-like those in gas stations and grocery stores-get the same interchange fee that bank ATMs get. The only difference is that retail stores and gas stations can deploy less expensive ATMs because they don't need to take deposits," Burgess said.

ABA spokesman John Hall emphasizes that "consumer advocates are failing to point out that the customer does have options" including free dipping at a home ATM (although not all home ATM withdrawals are free), writing a check, dipping a card at the grocery counter to pay for groceries and getting cash back, and going to a teller (The banking industry makes its case for the fairness of surcharges at www.atmchoice.com.)

The Real Question: "What's Right?"

Sensibly enough, the banks couch their response to anti-surcharge pressure in terms of consumers' self-interest: "Don't ban surcharges because that ban will be bad for you." But there's a larger, less practical, issue: Should these commercial organizations be subject to regulation by voter preference? Do Americans have the right to pressure their government into outlawing or decreasing charges they don't like-even if the targeted fees charges seem outrageous?

Yes, argues Golinger of the anti-surcharge side. "You're paying a charge for a service you don't really need. Banks save money on automated teller machines, and that's why they have them. Tellers cost far more than ATMs. When you dip your card in an ATM, banks are really just giving you back your own money, money you earned and paid taxes on and let them use however they like."