Why Is Pentagon Federal Credit Union Charging ATM Fees?

Automatic teller machines have become such an integral part of the way many Americans do their banking you can seemingly find one just about anywhere – at bank branches, as standalone kiosks on streets and in parking lots, inside shops, restaurants, and bars, even. But that convenience can come at a price, namely ATM fees.

Pentagon Federal Credit Union charges its members a fee for using an out-of-network ATM. If members use those machines regularly, the charges can really add up.

Pentagon Federal Credit Union

Established in 1935, McLean, Va.-based Pentagon Federal Credit Union has more than 2 million members worldwide and operates in all 50 states, the District of Columbia, Guam, Puerto Rico, and Okinawa, according to its website. The credit union has $25 billion in assets, is federally insured by the National Credit Union Administration, and is an Equal Housing Lender. It also goes by the name PenFed Credit Union.

Credit unions provide banking services such as checking and savings accounts, loans, and debit cards. Unlike banks, credit unions are not-for-profit organizations made up of members who control them. The members have a shared bond. They either work for the same company, belong to the same group, or are members of the same family, for example. There are credit unions for teachers, for residents of specific cities or states, for firefighters, for members of specific labor unions, homeowner’s associations, or social organizations, and for members of the military.

In PenFed’s case, its members consist mostly of current or former members of the U.S. Armed Forces, or their family members, and employees of the U.S. Department of Defense or Homeland Security, or their family members.

Membership is also available to anyone affiliated with certain organizations, such as the American Red Cross. Government contractors can also join. Finally, customers can become eligible to join Pentagon Federal Credit Union by joining an affiliated charity, such as the National Military Family Association, and making a small donation, according to the online consumer finance website NerdWallet.

The profits a credit union makes are to be returned to its members through things like reduced fees – like ATM fees – and better interest rates, according to the National Credit Union Administration’s online guide to credit unions.

Fees Overview

ATM fees are surcharges tagged on to transactions completed via the automatic tellers. Credit unions and banks operate ATMs, and so do independent automatic teller companies. All can charge fees for their use and the amount of those fees varies.

According to PenFed’s website, Pentagon Federal Credit Union members are charged $1.50 for every withdrawal made using an out-of-network ATM and $1 for each account balance inquiry using an out-of-network machine.

Therefore, if a PenFed member uses an out of network ATM to check their balance, and then makes a withdrawal, they will be assessed a fee of $2.50 by the credit union.

Those fees are charged in addition to any fees the owners of the out-of-network automatic tellers might charge. As many ATMs also assess fees for out-of-network people who use the machines to check account balances or withdraw cash, these double fees can quickly add up. Some customers have reported being charged $6 or $7 for withdrawing as little as $20. The average fee for using an out-of-network ATM may vary depending on where you live and which ATM you choose to use. In late 2019, the average fee assessed by ATM owners for out-of-network transactions was nearly $3.

How Can I Avoid ATM Fees?

An easy way to avoid ATM fees is to stop using out-of-network ATM machines. Large banks likely have in-network ATMs around the country. Although credit unions may have fewer in-network ATM locations, they may participate in an ATM co-op. These networks allow credit union members to access thousands of ATMs at in-network rates.

“If you’re a member of a credit union and it’s part of CO-OP ATM network, you will have access to 30,000 surcharge-free ATMs, covering all 50 states and 10 countries,” Terry Pierce, senior product manager for CO-OP Financial Services, told The Simple Dollar.

“CO-OP has the nation’s largest network of surcharge-free ATMs for credit union members, and larger than any commercial bank network — including Bank of America and Chase Bank.”

In addition to choosing ATMs wisely, consumers who wish to avoid ATM fees should also choose their financial institution wisely. There are banks and credit unions that offer no ATM fees to customers, though this is more common with online banks. Even if you can’t find a bank with no ATM fees, you may be able to find a financial institution with better terms than your current bank.

Another way to avoid ATM fees is to avoid withdrawing cash at these machines. Instead, consumers can withdraw cash by going into a bank or using its drive-through window to get cash through a bank teller. And many modern payment systems at mainstream grocery and convenience stores offer the ability to get cash back in the same way you would at an ATM.

Unfortunately, even when consumers do their best to avoid Pentagon Federal Credit Union ATM fees, they may still show up.

Why Is Pentagon Federal Credit Union Charging ATM Fees?

Each credit union operates with its own set of rules, established by its members, which means there are no universal policies when it comes to charging ATM fees. Nearly all credit unions offer their customers 24-hour access to their accounts at no charge at some automatic tellers, usually their own, according to consumer banking information website Find a Better Bank. The majority of ATM fees are charged when customers use out-of-network machines.

Pentagon Federal Credit Union maintains its own inventory of ATMs, which customers can use at no charge. In 2015, the credit union also partnered with the Allpoint network, one of the nation’s largest independent automatic teller machine networks. As a result of that deal, PenFed customers can also use any Allpoint ATM at no charge.

That gives Pentagon Federal Credit Union members access to a combined 56,000 ATMs throughout the U.S. and 12,000 in Canada, Mexico, Puerto Rico, the United Kingdom, and Australia, a press release about the PenFed and Allpoint agreement said.

Are the ATM Fees Legal?

According to federal banking laws, credit union ATM fees are legal if they are properly disclosed to customers. Otherwise, they would be considered hidden fees.

The Electronic Fund Transfer Act requires credit unions to inform consumers in writing of all fees they will be charged, and when, prior to charging them. ATM usage fees must also be disclosed to customers on the screen of the machine before they can be charged, giving the customer the option of declining to proceed.

Are ATM Fees in Violation of the Electronic Funds Transfer Act?

Pentagon Federal Credit Union’s ATM fees would be illegal under the Electronic Funds Transfer Act if they are not properly disclosed to credit union customers prior to them being charged.

Although this is the law, some consumers have reported that they were not notified of the fees when using an out-of-network ATM. In some cases, these fees may not have been disclosed in their credit union’s contract, or they may not have been disclosed on the ATM at the time of withdrawal.

Is it Possible to Get a Refund from Pentagon Federal Credit Union for the Fees Charged?

Some banks and credit unions refund their customers for ATM fees charged when the customers use out-of-network machines, but those refunds are usually one of the standing features of those accounts. Pentagon Federal Credit Union does not currently offer any accounts with those refunds built-in.

Pentagon Federal Credit Union customers are free to request a refund of an ATM fee if they think they have been wrongly charged. It will be up to PenFed to decide whether to agree.

However, if speaking with Pentagon Federal Credit Union does not result in having these potentially deceptive fees waived from your account, you may have other options. If you have been assessed fees without a warning after using an ATM, you may be able to speak with an experienced attorney about your possible legal options. Some victims of hidden fees may be able to file or join a class action lawsuit against their credit union.

Join a Free ATM Fees Class Action Lawsuit Investigation

If you were charged ATM fees without notification when you used an ATM machine, you may qualify to join this ATM fees class action lawsuit investigation.

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This article is not legal advice. It is presented
for informational purposes only.