What is direct charging?

I'm Jason Cameron, Savings & Loans' senior manager of Product and Research. Among other things, my job involves developing the products we offer our members - things like the types of loans we offer, the features of savings accounts, etc.

From today, there are changes to the way ATMs are used and operated in Australia with the introduction of ‘direct charging’. You may have seen some media articles about the changes, most of which focus on the possibility of fee increases rather than the positives for consumers.

In a nutshell, the introduction of ‘direct charging’ means that you’ll have greater control over how much you pay for using an ATM.

Here’s how the system works at the moment:

• A Savings & Loans member uses a non rediATM or ‘foreign’ ATM (for example, one owned by another financial institution or in a hotel)
• The ATM owner charges Savings & Loans for our member’s use of the ATM
• Savings & Loans charges our member $2 to offset the charge to us

And here’s how things will work from today:

• A Savings & Loans member uses a non rediATM or ‘foreign’ ATM
• After the member enters their PIN and selects the transaction they wish to perform, a message on the screen will tell them how much the ATM owner will charge for the transaction (known as the ‘direct charge’)
• The member then has the option of paying the fee or cancelling the transaction at no cost
• If the member proceeds with the transaction, the direct charge will be incurred and Savings & Loans charges 50c to cover the cost to us of processing the transaction
• There will be no standard direct charge fee for using a foreign ATM – it will be up to the owner of the ATM to decide the fee for using any particular machine

So the changes actually give consumers more choice and control over how much they pay in ATM fees.

I don’t think we’ll see any big changes to how much people pay to use an ATM. Importantly, it has let us reduce our non rediATM fee from $2 to 50c.

The most important thing to remember is that these changes only apply to foreign ATMs. If you’re a Savings & Loans member then you have access to over 1,300 rediATMs without incurring any direct charging fees (of course, your fee category and other usage will impact your transaction fees).

If you haven’t already noticed, ATMs branded with the Savings & Loans name and logo are being replaced by rediATMs. This will make it simple for our members to know which ATMs they’ll be able to use without being impacted by direct charging.

Credit unions are working together to expand the rediATM network, especially in areas where there isn’t a great deal of choice. If you don’t have a rediATM near you, either at home or when out and about, here are some other ways to keep fees low:
• Use EFTPOS to make a purchase and get some cash out at the same time. Some retailers even allow cash withdrawals via EFTPOS without a purchase of goods.
• Pay with your Visa Debit or Visa Care Card and select the ‘Credit’ option.

Credit unions around Australia will be adding more rediATMs over the coming months, so keep an eye on the Savings & Loans website for locations.

UPDATE

We have reviewed the non-rediATM fee and will reduce it further, to 25c per transaction, from 11 March.

Comments

[Sally]

So Savings & Loans will charge a 50c 'dishonour' fee for not using a rediATM?

Previously, a member was charged $2 for using a non-rediATM to 'offset the charge' of the transaction to Savings & Loans, made by the ATM owner. Now the ATM owners are charging their own direct fees to cover their costs, what is the 50c fee for?

[Jason Cameron]

@Sally

We still incur a cost to process all of our members' transactions, whether they're made through a rediATM or another financial institution's machine. The new 'direct charging' system means most of the expense for use of a non rediATM is being incurred (and a fee is collected) by the ATM owner, however there are still some costs passed through to Savings & Loans. We also need to pay for the installation and maintenance of the relevant infrastructure (IT systems, etc) that allow our members easy access to their accounts.

The charges we pass on to our members reflect the cost of operating the relevant channels: Internet Banking and Phone Banking are lower cost options for members, ATMs are more expensive due to the security and infrastructure costs, and branch transactions are more expensive again due to staff time required.

Remember that the non rediATM fee doesn't apply if you choose to use a rediATM.

[Eleanor]

I think that's ok but there are some areas that don't have Redi-tellers and the agency in my area is only open shop hours. So, there is no option but to use a 'foreign' ATM. There are lots of banks with ATMs in Stirling (in the Adelaide Hills) and I can't work out why there isn't a rediteller there (or in Hahndorf or Aldgate). Mount Barker is our closest and that is totally out of our way. Do you have any plans to locate a redi-teller ATM in any of these places? Is there already a redi-teller that I have (obviously) missed?

Also, what is your comment on the current news that Australian banks etc charge far higher fees compared with financial institutions in other countries.

[Geoff]

Jason, you say that there are benefits to the new system. What are they? It appears that the benefits are for the financial institutions, not the customers.

I travel interstate quite a bit & dont want to carry too much cash on me. So yesterday I had to use a "foreign" ATM from a regular bank with a $2 fee & you also slugged me 50c. So I am worse off than under the old system.

And people in the finance industry wonder why most customers are cynical about banks and credit unions who act like banks when it comes to fees. Jason, can you please explain to us the "benefits" for the consumer in the new system?

I have stayed loyal to S&L as I am no fan of banks, and you are a local business. But increasing the total take on my money by 25% makes me wonder whether it is time to move to a bank with a nation wide presence to avoid such fees. Its a pity when a desire to support local industry is "rewarded" with such fee increases.

[Jason Cameron]

@Geoff

Remember that we do have a national network of ATMs, known as the rediATM network. By using a rediATM, you're able to avoid all direct charge fees.

[Sean]

At the end of the day it costs us more, so I fail to see how you can put a positive spin on this.

(However, halving the rate to 25 cents was a nice touch...)

[Bernadette]

On the other hand the number of non-foreign ATMs has gone up and it's easier to find them and know which ones are fee-free - even interstate where you're not so familiar with things (I travel too).

I'm still a happy S&L customer

[Fiona]

NAB dumped their 50c disloyalty. As well as another bank with their 25c originally being charged. With S&L continuing to charge this disloyalty fee of 25c, it is only giving Credit Unions a bad name - making them look worse than the banks!