Are you tired of all the fees?” Stick your community bank card in a Bank of America ATM and you get whacked for $3. Those faceless corporate profiteers are having their way with you. It’s a familiar admonishment from community banks trying to lure customers away from big banks.

But it’s not entirely truthful.

Community banks charge fees, too. They just aren’t pilloried for passing on costs to customers.

The truth is banks count on fees and other “non-interest income” to boost or bolster profitability. It doesn’t account for a huge portion of any bank’s bottom line, but community banks have become more dependent upon non-interest income in recent years in order to compensate for declines in other areas of the balance sheet.

Still, the marketing temptation is strong, and even the Massachusetts Bankers

Association has warned that cutting fees is ultimately counterproductive and unsustainable despite the fleeting competitive advantage.

So, is there a “right way” to charge fees, whether they’re for ATM use or overdraft protection? Maybe there is.

For marketing folks and bankers alike, it’s a matter of perception.

Choice Matters

Jim Pond, president of Gardner-based marketing firm Compassed, told Banker & Tradesman banks and their customers play a game of give-and-take when it comes to fees. Choice, he said, is the most important thing a bank can offer.

“They need to give consumers choice,” Pond said. “We’ve been working a lot with clients to develop the customization of products because a lot of people don’t use cash. They don’t care about ATM fees.”

In Massachusetts, non-interest income, like average assets and margins, has been flat or deflating in recent years, according to Federal Deposit Insurance Corp. (FDIC) data.

In 2010, median non-interest income at Massachusetts institutions, which includes items like fees and charges, was 0.56 percent of average assets. In the first quarter of 2011, it was 0.47 percent. It worked its way up to 0.52 percent in the first quarter of 2012, according to the FDIC.

Over that time, margins have been similarly flat. Statewide in 2010, the median net interest margin was 3.43 percent. In the first quarter of 2011, it was 3.42 percent and in the first quarter of 2012, it was 3.31 percent.

“We’ve all been wrestling with cost,” said Peter Alden, president and CEO of Worcester-based Bay State Savings Bank. “Fee income – traditionally it hasn’t been the biggest line item, but it is important, and in most banks it’s decreased.”

Within the last couple of weeks, a U.S. Appeals Court ruled in favor of major banks that charge ATM fees to cardholders who withdraw money from other banks’ machines.

The ruling came in a case filed eight years ago. In it, plaintiffs accused Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co., Citigroup Inc. and other banks with fixing those fees. The court found that a fee that banks charge each other for such transactions was not directly passed on to customers.

Beat The Heat

Still, fees of any kind, especially those charged by big banks, have become a major target of opportunity for consumer groups – as well as the community bank and credit union industries – as they look to take the fight to their much larger competition.

And community banks don’t seem to take the same heat as the big banks when it comes to charging fees.

“Overdraft fees, every bank has them,” Alden said. “But (a customer) might not be upset if you charge them and pay the check. We all charge fees, whether it’s built into our cost structure or charged directly, but it’s been such a high profile thing for some big banks that they’ve been singled out.”

Pond said customers simply want to know what they’re getting and want options and flexibility.

For example, a bank may do well to offset fees by offering another perk, essentially saying something to the effect of, “We’re going to charge ATM fees, but we’re also going to add a half-percent higher payout rate on your account.”

Smart banks, Pond said, “are looking at product groups, at building products and services around specific user groups, not just blanket fees or benefits. When it appeals to everyone, it appeals to no one. No one cares. That’s the problem, at least in my mind, with the industry.”