Even though consumers have to pay a fee to use another bank's ATM, the surcharge is actually a benefit in disguise for customers living in big cities, two economists say in a study about consumer welfare and ATMs.

"If not for these surcharges," says economist Christopher Knittel of UC Davis, "we wouldn't have an abundance of ATMS; the surcharges generate revenues, making ATMs profitable in new locations."

Using data on consumer deposit account choices from almost every county in the nation, Knittel and Victor Stango of Dartmouth College looked at how ATMs affect consumer choice. They found that consumers place a high value on ATMs from their own bank and, to a lesser degree, on ATMs from other banks.

"Why do banks like Bank of America and Wells Fargo have many customers?" Knittel asks. "It's because they have a lot of ATMs."

As additional evidence of the importance banks place on ATMs to increase their customer base, Knittel points to recent bank advertisements that emphasize the number of ATMs.

Knittel and Stango found that people living in sparsely populated areas generally do not get the same benefits as customers in urban areas because these consumers do not use ATMs as much and the ATM growth rate has been lower.

Knittel and Stango speculate that one reason urban customers are willing to put up with an ATM surcharge is that they have higher travel costs than those living in rural areas. The city dwellers may be balancing the cost of travel to a machine with no surcharge with the convenience of paying a small fee to get their cash quickly.

"The ATM surcharges definitely hurt us financially, but without them there would be fewer ATMs, and people like to use ATMs," Knittel says.