During the last two months I have been trying to find out why I am being charged erroneous ATM fees by my bank. Last month my statement showed a “foreign ATM transaction fee,” which normally would result if I had withdrawn money using an ATM that was not owned by my bank. When I insisted that I had only withdrawn funds from ATM’s owned by my bank, they researched the fee and told me it was levied when I used my debit card to pay my AT&T cell phone bill online. Even though my bank graciously agreed to refund the fee, I was determined to make sure it didn’t happen again. I logged in to my online account with AT&T and read over all their policies regarding the fees they charge for various payment methods. Of the online payment options, their website states:

We accept the following forms of payment:
* ATM debit cards – STAR, Pulse, ACCEL, NYCE
* Credit/debit cards – Visa, MasterCard, American Express, Discover Network, Diners Club

There is no other distinction made between credit and debit cards and no notice that any fees will be levied if a debit card is used. I assumed it was a one-time mistake.

This month I again used my debit card to pay my AT&T cell phone bill online. Two days later, the monthly phone bill showed up on my bank statement, along with yet another “foreign ATM transaction fee.” This time I called AT&T. Since the customer service rep that I reached was unable to answer my question, she accelerated my issue to the supervisory level and then became the go-between in the resulting conversation: I asked a question of the rep, she repeated my question to the supervisor, he provided an answer to her, and she then relayed that answer to me. I never did find out why I couldn’t talk directly to “Supervisor Crawford,” who insisted that AT&T does not charge a fee for the use of a debit cards and went so far as to say that my bank way lying to me. So sure of his position was Crawford that, through the customer service rep, he suggested I have the bank fax him written proof that AT&T had charged a fee for use of a debit card to pay the bill.

Realizing by now that I was in one of those situations where everyone is pointing the finger at the other party, I was determined to get to the bottom of this issue. Again my personal banker told me that the charge was the result of withdrawing cash from an ATM machine outside of my banking system. Again I insisted I had not used any ATM’s other than those owned my my bank. And again, my banker refunded the fee. When she did so, the bank’s software confirmed that it had been the result of the AT&T payment. In my frustration, I asked how AT&T could get away with charging such a fee without disclosing it to the customers. My banker explained that AT&T was not charging the fee – that my bank was charging the fee because AT&T was putting the fee through as an ATM transaction. Indeed, when I revisited my bank statement online, I noticed that AT&T’s line item said “HONOR Withdrawal – AT&T ATM QA TAMP.”

By now, even my personal banker’s curiosity had been piqued; she was puzzled as to why AT&T would be putting through the payment as an ATM transaction. What would be the benefit to them? Suddenly, she knew the answer. “It’s because the merchant services are less on a debit card than a credit card.” When customers pay with a credit card, the merchant is charged a fee, usually in the range of 1.5-3% of the purchase amount. Putting it through as an ATM transaction ensures that the banking system will see it as a debit card rather than a credit card, and debit card transactions carry much lower fees for merchants. Unfortunately, when the payment is processed in this manner, the bank sees it as a “foreign ATM transaction,” which results in a $2 fee being charged to my account.

So, while “Supervisor Crawford” was technically correct when he said that AT&T was not charging me an online payment fee, I am incurring a monthly banking fee as a direct result of AT&T’s processing practices. AT&T makes no disclosure of this practice and in effect, denies any responsibility for the charge. At the very least, in my opinion, this is unethical. It may well be illegal. And although I am not a litigious person, I can’t help but wonder if this is the stuff of which class-action lawsuits are made.