Automated teller machines, or ATMs, are increasingly becoming the new battleground between banks, according to a report by the Federal Reserve Bank of San Francisco.

The federal report, issued on Dec. 16, said banks can use ATMs not only to gain profit from users, but also to drive up the costs of a competing bank.

When a customer of Bank A uses a machine owned by Bank B, Bank A must pay the network operator used by Bank B a switch fee for routing the transaction. So Bank B can increase the operating cost of Bank A by getting its customers to use Bank B’s ATMs.

All bank-card-issuing institutions are linked by networks like Cirrus and Plus. Cirrus is operated by MasterCard; Plus is part of Visa.

To recover the cost, banks often pass the fees on to the customers, federal economist John Krainer said in the report. He added that the cost can be compounded by the bank associated with the used ATM.

”Bank A may charge its card-holding customers a foreign fee for using Bank B’s machine, and Bank B may charge the customer from Bank A a surcharge fee for using its ATM machine,” Krainer wrote.

Some states had a cap put on the amount of surcharge fees that a bank can charge the customers of another financial institution. Until 2003, Iowa state legislature prohibited the levying of ATM surcharges.

Oregon has no such law.

In Bend, ATM surcharges vary greatly.

Local community institutions like Bank of the Cascades and Community First Bank charge $1.50 for cash withdrawal requests from people without local accounts.

National banks such as Wells Fargo and U.S. Bank charge $2, and regional banks like Columbia River and Umpqua charge $2.25 and $3, respectively.

Umpqua isn’t looking at ATM surcharges as a key source of income, since the bank doesn’t have ATMs located in areas with heavy customer traffic, said Lani Hayward, director of creative strategies.

”Our strategy has not been about (gaining profits by setting up more ATMs),” Hayward said. ”All of our ATMs are pretty much attached to our banks, so we’re really not going after surcharge income. We could, but we don’t.

For Bank of the Cascades, the surcharge is simply there to cover the cost of cross-institutional transactions, said Patricia Baughman, vice president of product management. ”We try to charge fees to cover our costs,” Baughman said. ”Some banks may have transaction fees (based on percentage of the transaction amount), but we want customers – not only our own but also those of other banks – to have access to their funds conveniently.”

For Bank of the Cascades, the surcharge is simply there to cover the cost of cross-institutional transactions, said Patricia Baughman, vice president of product management. ”We try to charge fees to cover our costs,” Baughman said. ”Some banks may have transaction fees (based on a percentage of the transaction amount), but we want customers – not only our own but also those of other banks – to have access to their funds conveniently.”

Michael Anderson, Columbia River Bank’s regional manager for Central Oregon, said there is another potential cost factor for ATM users: Banks don’t usually own the ATMs that are not attached to a branch. The owners of off-site ATMs can add to user costs by trying to make a profit on their machine.

”With off-site ATMs, people who own the machines usually charge about a buck for transactions, and the bank associated with the machine usually charges another buck,” Anderson said. ”For us, (the charge) covers operation fees. There may be some profit margin for the machine owners, but that’s usually pretty minimal.”

Despite the costs, all signs indicate ATMs will continue to thrive. The federal report said it found consumers ”are willing to pay an estimated 8 to 10 cents to reduce the distance to an ATM by one kilometer (0.62 miles).”

That means a customer is willing to pay the national ATM average surcharge fee of $1.50 to save 9.3 miles of travel.

Anderson said he isn’t surprised.

”Typically, most people don’t seem to mind,” he said. ”People are willing to pay for the convenience; when you need a couple hundred dollars, a couple of bucks of service charge usually isn’t that big of a deal.”

There are about 371,000 ATMs in the country as of 2004, according to statistics by the research firm Dove Consulting. Those machines process about 30 million transactions every day, according to the same report.