Definition of automated teller machine (ATM)


What is an automated teller machine (ATM)?

An automated teller machine (ATM) is an electronic banking point of sale that allows customers to complete basic transactions without the assistance of a branch representative or teller. Anyone with a credit or debit card can access cash at most ATMs.

ATMs are convenient and allow consumers to conduct quick self-service transactions such as deposits, cash withdrawals, bill payments, and transfers between accounts. The bank where the account is located, the ATM operator, or both charge fees for cash withdrawals. Some or all of these fees can be avoided by using an ATM operated directly by the bank holding the account.

ATMs are known in different parts of the world as automated teller machines (ABM) or ATMs.

Key takeaways

  • Automated Teller Machines (ATMs) are electronic banking outlets that allow people to complete transactions without having to go to a branch of their bank.
  • Some ATMs are simple cash dispensers, while others allow for a variety of transactions, such as check deposits, balance transfers, and bill payments.
  • The first ATMs appeared in the mid to late 1960s and have increased in number to more than 2 million worldwide.
  • Today’s ATMs are technological marvels, many of which can accept deposits, as well as various other banking services.
  • To keep ATM fees low, use your own bank-branded ATM as often as possible.

Click Play to learn how ATMs work

Understanding ATMs

The first ATM appeared at a Barclay’s Bank branch in London in 1967, although there are reports of a cash dispenser in use in Japan in the mid-1960s. Interbank communications networks that allowed a consumer to use one bank’s card at another’s ATM came later, in the 1970s.

Within a few years, ATMs had spread throughout the world, ensuring a presence in all major countries. Now they can be found even in small island nations like Kiribati and the Federated States of Micronesia.

2.2 million

Today, there are more than 2.2 million ATMs in use around the world.

Types of ATMs

There are two main types of ATMs. Basic units only allow customers to withdraw cash and receive updated account balances. More complex machines accept deposits, facilitate payments and credit line transfers, and access account information.

To access the advanced features of complex units, a user often must be an account holder at the bank that operates the machine.

Analysts anticipate that ATMs will become even more popular and forecast an increase in the number of ATM withdrawals. The ATMs of the future are likely to be full-service terminals rather than or in addition to traditional bank tellers.

Cryptocurrency enthusiasts can now buy and sell Bitcoin and other cryptocurrency tokens through Bitcoin ATMs, internet-connected terminals that will dispense cash in exchange for crypto or accept cash or credit card for purchase. There are now almost 10,000 Bitcoin ATMs located around the world.

ATM design elements

Although the design of each ATM is different, they all contain the same basic parts:

  • Card reader: This part reads the chip on the front of the card or the magnetic stripe on the back of the card.
  • Keyboard: The customer uses the keyboard to enter information, including the personal identification number (PIN), the type of transaction required, and the amount of the transaction.
  • ATM: Banknotes are distributed through a slot in the machine, which is connected to a safe at the bottom of the machine.
  • Printing machine: If necessary, consumers can request receipts that are printed here. The receipt records the type of transaction, the amount, and the account balance.
  • Screen: The ATM issues prompts that guide the consumer through the transaction execution process. Information is also transmitted to the screen, such as account information and balances.

Full-service machines now often have slots for depositing paper and / or cash checks.

Special considerations: use of ATMs

Banks place ATMs inside and outside their branches. Other ATMs are located in high-traffic areas, such as shopping malls, supermarkets, convenience stores, airports, bus and train stations, gas stations, casinos, restaurants, and other places. Most ATMs found in banks are multi-functional, while others that are off-site tend to be designed primarily or entirely for cash withdrawals.

ATMs require consumers to use a plastic card, be it a bank debit card or a credit card, to complete a transaction. Consumers are authenticated using a PIN before any transaction can take place.

Many cards come with a chip, which transmits data from the card to the machine. These work in the same way as a barcode scanned by a code reader.

$ 60

The average amount of cash withdrawn from an ATM per transaction.

ATM fees

Account holders can use their bank’s ATMs free of charge, but access to funds through a unit owned by a competing bank generally carries a fee. According to MoneyRates.com, the average total fees for withdrawing cash from an out-of-network ATM was $ 4.55 in 2021.

Some banks will reimburse their customers for the fee, especially if there is no corresponding ATM available in the area.

So if you’re one of those people who withdraws money from an ATM weekly, using the wrong machine could cost you almost $ 240 a year.

ATM ownership

In many cases, banks and credit unions have ATMs. However, individuals and businesses can also buy or lease ATMs on their own or through an ATM franchise. When individuals or small businesses, such as restaurants or service stations, own ATMs, the profit model is based on charging fees to users of the machine.

Banks also have ATMs for this purpose. They use the convenience of an ATM to attract customers. ATMs also take some of the customer service burdens off bank tellers, saving banks money on payroll costs.

Use of ATMs abroad

ATMs make it easy for travelers to access their checking or savings accounts from almost anywhere in the world.

Travel experts advise consumers to use foreign ATMs as a source of cash abroad, as they generally receive a more favorable exchange rate than at most foreign exchange offices.

However, the account holder’s bank may charge a transaction fee or a percentage of the amount exchanged. Most ATMs don’t include the exchange rate on the receipt, making it difficult to track expenses.

How much can you withdraw from an ATM?

The amount you can withdraw from an ATM per day, per week, or per month will vary depending on your bank and the status of your account at that bank. For most account holders, for example, Capital One imposes a daily ATM withdrawal limit of $ 1,000 and Well Fargo only $ 300. You may be able to get around these limits by calling your bank for permission or by improving your bank status by depositing more funds.

How do I make a deposit at an ATM?

If you are a bank customer, you may be able to deposit cash or checks through one of their ATMs. To do this, you may simply need to insert the checks or cash directly into the machine. Other machines may require you to fill out a deposit slip and put the money in an envelope before inserting it into the machine. For a check, be sure to endorse the back of your check and also write “for deposit only” to be safe.

Which bank installed the first ATM in the United States?

The first ATM in the US was installed by Chemical Bank in Rockville Center (Long Island), NY in 1969 (2 years after Barclays installed the first ATM in the UK). By the end of 1971, more than 1,000 ATMs were installed around the world.

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Mark Holland

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