Charges penalise people on low incomes, campaigners say

About 40% of the UK's cash machines now charge customers to withdraw money, the Nationwide building society has said.

The number of ATMs that charge has grown by 29% in the past year while free machines grew by just 0.3%, Nationwide said.

Nationwide predicts that by Christmas 2005 the majority of ATMs will charge.

'Convenience' boom

The growth can largely be attributed to the increasing number of ATMs located in newsagents and convenience stores, many of which charge their customers.

These cash machines typically charge users between �1.25 and �1.75 a transaction.

"This is a defining moment as this could be the last Christmas where there are more free machines than fee-charging ones," said Stuart Bernau, Nationwide's executive director.

Nationwide estimates that consumers made 98.8 million withdrawals from fee-charging machines in the 12 months to September 2004.

The Treasury Select Committee will start its enquiry into cash machine charges on 21 December, following concern about the spread of fee-charging machines.

WHAT IS THE LINK NETWORK? The vast majority of banks 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.

According to Nationwide, 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 per withdrawal, this equates to a 7.5% charge for making a �20 withdrawal.

There is a long-term concern that the growth of these ATMs could jeopardise the existing agreement between major banks which allows users to withdraw money for free.

Campaigners are also concerned that charges hit people on low incomes hardest, as these people are more likely to make smaller, more frequent withdrawals and are therefore disproportionately bearing the brunt of charges.

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.