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What is an Automated Teller Machine?

By Lori Smith
Updated May 16, 2024
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An automated teller machine (ATM) allows a banking customer to withdraw money without having to actually visit his or her financial institution. When using an ATM, or debit card machine, a customer inserts a card into the machine, enters a preselected personal identification number (PIN), and is able to perform a variety of banking operations. The consumer may withdraw cash, view an account balance, transfer money between accounts, and sometimes, make deposits. At most ATMs, the customer can also obtain cash advances from a major credit card account.

An individual usually does not have to travel very far to find an automated teller machine. One can often be located at a bank, grocery store, pharmacy, hotel lobby, airport, convenience store, hospital, shopping mall, or just about any place someone may need access to quick cash. When a checking or savings account is accessed using an automated teller machine, the money withdrawn is automatically deducted from an individual's respective account.

Cash advances can also be obtained using credit cards in many cases. When utilized in this manner, the charge generally shows up on the next month's credit card bill. In this case, the consumer can often pay back the borrowed money over a period of several months. The downside to this method, however, is that interest accrues as a result of the transaction. Many times, the interest rate imposed is higher than when a consumer makes a standard point-of-sale purchase.

An automated teller machine frequently charges a flat fee for the withdrawal of funds. This is especially true if the transaction takes place at an ATM that is owned by a financial institution different from the one that issued the debit card. The cost varies, but is usually no more than a few dollars. The consumer’s own bank may also charge a separate fee for this type of transaction.

To avoid these additional charges, customers can often visit an automated teller machine located outside their own bank. This is a service usually provided free of charge for consumers. Alternatively, many business establishments accept ATM cards as a form of payment. When they are used in this manner, there is rarely a fee.

At the point-of-sale, the consumer is sometimes allowed to request cash-back when making a purchase. This means that in addition to deducting the money for the sale, an individual can request additional funds from the merchant. Many stores, however, have established limits on the amount of cash a consumer can request at one time. This amount is then added to the purchase price, and deducted from the bank account used for the transaction.

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