How to avoid pricey fees at ATMs and retailers

Handing over an extra 50 cents to a dollar to get $50 in cash back at a supermarket or dollar store could seem relatively minor, given all the high prices and fees consumers are getting slapped with these days. Except if you live in a banking desert, the dollar store might be where you can get cash if you can't find a nearby bank branch.

Or if you're trying to avoid record high fees for ATM withdrawals at a machine not part of your bank's network.

A new report on cash-back fees, issued in late August by the Consumer Financial Protection Bureau, puts the spotlight on cash-back fees. The report estimated that some $90 million in fees are collected each year by big retailers who charge some type of fee for consumers to get their hands on their own cash.

The fees themselves aren't entirely new. But some fees, as outlined in the report, are higher than you might expect:

• $1.50 to $2.50 a pop to get up to $40 cash back at Dollar General. The fee varies depending on the amount and other factors, according to the CFPB. In December 2022, CFPB mystery shopped at nine Dollar General locations in one state, across a mix of rural, suburban and urban communities. The sample size is small and is not intended to be representative. But the store located in the smallest and most isolated county within the sample, with only about 3,600 people, had the highest reported fee amount of $2.50 to withdraw $40.
• $1.50 to get up to $50 cash back when making a purchase at Family Dollar. The fee is only $1, though, at another corporate branch, the Dollar Tree.
• Kroger charges a 50-cent fee to get up to $100 cash back, but that fee soars to $3.50 when you request more than $100. Shoppers can get up to $300 in cash back at the checkout.
• Harris Teeter, a subsidiary of Kroger that has 261 grocery stores in eight states, triggered an uproar some communities on the East Coast in January when the upscale North Carolina-based chain began charging a 75-cent fee for cash withdrawals up to $100. The store continued its earlier practice of charging a $3 fee for cash withdrawals exceeding $100. The maximum that can be given via cash-back on a PIN-based debit card is $200 at Harris Teeter.

Back in 2019, Kroger Co. rolled out a 50-cent cash-back fee when a consumer requested $100 or less. The retailer charges $3.50 for amounts between $100 and $300. The CFPB noted that at the time of the rollout in 2019, Kroger noted two exceptions: Electronic benefits transfer card users would not be charged a fee, and customers using their Kroger Plus card would not be charged for amounts under $100 but would be charged 50 cents for larger amounts.

Kroger did not respond to questions by the Free Press.

While not huge, the fees are charged on relatively small amounts of money. As a result, we're talking about a 6.25% fee if you're paying $2.50 to get $40 in cash back.

The retailer decides where it will set a limit for cash-back options in a single transaction.

Dollar store chains are often located in rural area, low-income communities and communities of color, the CFPB noted. Those are the same communities in many cases with limited access to banks.

The concern is that the extra fees are being charged to people who can least afford them.

And while some of those fees may be posted, they aren't always. I visited a Dollar Tree in Hazel Park, Michigan where "No Cash Back" notes were tapped onto the swipe readers on Wednesday. The clerk said the signs were for the morning when the store didn't have enough cash. But she wasn't certain what the fee was and suggested she thought it was $1.25 to get cash back. After all, items in the dollar store are no longer $1. Instead, they're $1.25.

I couldn't spot any signs listing the actual fee charged to shoppers who wanted cash back with a PIN-based transaction.

Retailers set the limits on how much you can withdraw or get back in cash from your account at checkout. In some cases, you might be able to get more money in cash back if you work ask first at the service desk, instead of going to the checkout lane.

It's estimated that cash withdrawals at retail locations made up 17% of all ways people got cash from their checking account, savings account or prepaid card, according to a CFPB analysis. And 61% of those transactions for getting access to cash involved an ATM and 14% involved going to a bank teller.

Some consumers pay more than $5 to use an out-of-network ATM

Make no mistake, consumers nationwide could end up paying nearly $5 to withdraw money from their accounts if they use an ATM that's outside of their bank's network. But typically, you're going to be able to withdraw more money than $40 or $50.

In Detroit, the average ATM fees combined hit $5.18 when you're using an ATM that's not run by your bank, according to the latest according to the latest Bankrate.com survey released Aug. 21.

Detroit ranks No. 4 out of 25 metropolitan areas with Atlanta grabbing the top spot with a average fee of $5.33. Boston ranked at No. 25 with an average of $4.16.

People get hit with two fees to get to that high average.

Banks will charge people who aren't their customers a surcharge for using their ATM — which hit a record average nationwide of $3.19, according to the latest Bankrate survey.

And some consumers can pay another $1.58 on top of that, a fee charged by their own bank to use a different ATM. That out-of-network fee is charged in 61% of cases, according to Bankrate’s survey.

Together, both average fees add up to an average $4.77 nationwide — the highest amount since Bankrate launched the annual survey in 1998. The figure represents the average charge from your own bank and the average surcharge assessed by the bank that operates the ATM that you used outside of your network.

Back in 1998, the two fees added up to $1.97. The last time they added up to less than $3 was 2006, according to Bankrate's data.

What's unsettling is that some people may not live close to an ATM run by their own bank, especially if their bank closed the branch in their neighborhood at some point. So, they might be more likely to try to get cash at the store.

Dollar General defended their fees in a statement sent to the Detroit Free Press. "While not a financial institution, Dollar General provides cashback options at our more than 20,000 stores across the country as a service to customers who may not have convenient access to their primary financial institution."

"These services may also help customers save money on fees compared to alternative, non-retail options such as check cashing locations or ATM fees," according to the Dollar General statement.

Retailers, of course, benefit by offering cash back, along with everyday staples like bread and milk. Some people might go to a store because they know they can get cash when they're shopping.

Another point: Offering cash back reduces a retailer's handling costs for cash, according to the Consumer Financial Protection Bureau. The retailer isn't having to deposit extra cash at the end of the day.

The extra cost that the retailer takes on for processing is relatively minimal, according to the consumer watchdog agency's estimates, ranging from a penny per transaction to up to 20 cents in some cases.

Walgreens, Target, CVS and others offer cash-back for free

It may be possible for some people, depending on where you live or work, to shop around to get cash back — and avoid yet another pesky fee.

Pay attention to the fees for your bank or credit union for out-of-network ATMs.

“Many credit unions and smaller banks that have a limited number of ATMs, if any at all, belong to large, nationwide ATM alliances that permit free withdrawals at any of tens of thousands of ATMs nationwide," said Greg McBride, chief financial analyst for Bankrate.com.

Plan ahead. Check your bank or credit union’s app to find the location of fee-free ATMs.

All retailers aren't charging a fee if you want some extra money back at the register when you're shopping with a prepaid card or debit card. Walmart has no fee to get up to $100 in cash back, according to the CFPB report.

• Walgreens will give you up to $20 cash back with no fee when you're making a purchase with a debit card.
• Target has no fee for PIN-based transactions if you want to get up to $40 in cash back.
• CVS will give you up to $60 in cash back with no fee, according to the CFPB research.

In addition, according to the CFPB, many local independent grocers also offer cash back as a free service.

I contacted Meijer, which told me they will give up to $50 cash back at their stores with no fee when the transaction involves a PIN-based debit card.

Meijer also offers up to $5 cash back with a PIN-based debit cards when customers are at Meijer Express locations, which sell gas and other goods, said Frank J. Guglielmi, senior director of corporate communications for Grand Rapids, Michigan-based Meijer.

"Most PIN-based debit cards are eligible for cash back transactions at Meijer," Guglielmi said. "Customers should check at their store if they have questions about a specific type of card as there are many versions out there."

Contact personal finance columnist Susan Tompor: stompor@freepress.com . Follow her on X (Twitter) @ tompor .

This article originally appeared on Detroit Free Press: How to avoid pricey fees at ATMs and retailers