The Pros and Cons of ATM Banking

By Dr. Bernice Wilson, Resource Management Specialist

The acronym ATM stands for automated teller machine. ATMs have become an integral part of our lives and have existed since the mid-1960s. According to MSNBC Technology Correspondent Bob Sullivan, there are approximately 370,000 ATMs across the United States or 1 for every 296 people. That may be too many according to a recent study by the Dove Consulting Group.

Tony Hayes, author of the Dove Group report, stated that as many as 50,000 ATMs may disappear during the next three years if something is not done to rectify this problem. ATM locations make a difference in how they are used and the best locations are gone. Hayes further stated that running an ATM costs roughly $1,000-1,500 per month. Even if fees are at the high end, $2 per withdrawals is insufficient.

In the 1960s, the primary purpose of the ATM was to provide cash. However, today you can go to your bank's ATM to make a deposit or loan payment, to transfer funds between accounts, or to check your account balance. ATMs are used to obtain money from anywhere in the world. To carry a debit card means you can carry less cash on your person, which guards against money being lost or stolen. Some ATMs will even allow you to buy postage stamps or add money to a prepaid cellular phone service. Although ATMs are common and helpful, people are reluctant to use them because of the misinformation associated with using ATMs. ATMs in the United States handle more than 10 billion transactions a year and the vast majority of the time transactions occur without glitches. Nevertheless, there are times when ATM users encounter problems.

The use of ATMs makes it convenient for shoppers in the marketplace, yet it can be costly. For example, withdrawing cash from another ATM outside your bank's network may require you to pay a fee ranging from $1.00 to $4.00 per transaction. Such fees may seem small but they add up over time. To avoid paying ATM fees, use your own bank's machines whenever possible. Virtually all banks offer accounts with free ATM transactions to their own customer. However, some financial institutions do have accounts that charge their own customers an ATM fee. Therefore, it would be wise to look carefully at the accounts that are available and choose the one that meets your needs. For example, choose an account that allows free withdrawals from an institution with numerous locations. However, in the event your bank charges an ATM fee, it will probably be less than ATM fees at other banks. Your bank may be able to provide you a listing of banks that will not charge you a fee, or you can find this information on the Internet.

In addition, if you must use another ATM, become familiar with your own bank's fee for using another institution's ATM. Some banks have agreements not to charge ATM fees to each other's customers. Keep in mind that if you are unable to use a surcharge-free ATM, you could incur two charges---one from the ATM owner and one from your own institution. Federal law requires that ATMs caution non-customers about surcharges before completing a transaction.

Consumers can save time and gas by withdrawing larger sums of money. For example, make a single $100 or $200 ATM withdrawal instead of several $ 20 or $40 withdrawals. You can also save time and energy by getting cash back free when you use your debit card to make purchases at the grocery store or other businesses. Some stores will also cash a check free of charge or charge a fee that would be less than what you will pay at an ATM.

Consumers should also be aware of possible bank overdraft fees when using an ATM card. It is wise to record debit card transactions in your checkbook or another record keeping tool. You cannot always rely on the receipt received from the ATM. This balance may not reflect the checks you have written that have not been paid yet, or debit transactions that have not been posted to your account.

Under the Electronic Fund Transfer Act (EFTA) there are laws protecting ATM users.

  1. If you believe there is an account error involving an ATM transaction, contact your financial institution within 60 days after receiving the statement containing the problem. Your institution must investigate the matter promptly.
  2. If your ATM card is lost or stolen and is being used by a thief, notify your financial institution within two business days after learning your ATM or debit card has been lost or stolen. The EFTA limits your losses to $50 or the amount of the unauthorized transfers whichever is less. If you wait more than two business days to report a lost or stolen card, you could be liable for losses up to $500. If you wait more than 60 days after receiving a bank statement that includes an unauthorized transfer, for example, the law does not require your bank to reimburse you for any losses due to unauthorized transfers made after the 60-day period. Notifying banks in a timely manner will immediately limit your liability for unauthorized transactions.
  3. The EFTA also requires that consumers be told about ATM fees and other matters regarding transactions. Also, any ATM owner that imposes a surcharge for using its machine must disclose the amount of the fee and allow the user to cancel the transaction.

In summary, with an ATM (debit) card, you buy now and pay now. There are no interest charges. Using a debit card is easier and faster than writing a check. It helps you to avoid debt problems. Like credit cards, banking institutions with debit cards are beginning to offer free services to its patrons and some purchase protections. But remember, debit cards have fees on certain transactions and it's important to record all debit card transactions.

Federal Deposit Insurance Corporation. (Spring 2004). ATMs and you: Tips on self-service banking. FDIC Consumer News. Retrieved September 27, 2004, from

Sullivan, B. (2004). Are there too many ATMs? MSNBC News. Retrieved September 27, 2004, from

Federal Deposit Insurance Corporation. (Fall 2002). Playing your cards right: Smart ways to use credit and debit cards. FDIC Consumer News. Retrieved September 27, 2004, from

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