If you are still paying ATM fees, it’s time to find a new bank.
Too many customers have gotten used to paying ATM fees, but there is no reason for it. Good banks, credit unions, and financial institutions all have multiple options to use ATMs for free, including, in some cases, refunding ATM charges.
Keep in mind this all applies to checking accounts or checking-linked accounts. Savings accounts and money market accounts have different rules and restrictions. After all, savings accounts are not designed for frequent fund access, that’s why they pay you higher interest rates.
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High ATM Fees
It used to always surprise me as a financial advisor in the Denver area how many people would proudly tell me about all of the hoops they jumped through to get a credit card with zero interest for six months, or how to get a fraction of a percentage higher interest rate on their savings account, only to later learn that they were shelling out for much worse charges like ATM fees.
Sure, six months of free interest on a hefty credit card balance is probably worth more than $5 or $10, but getting that extra 0.5% interest on your savings account, which adds up to maybe $4 or $5 over the course of the year, just to rack up $5, $10, or even $20 in ATM fees is laughable.
Don’t get me started on the fees charged by the ATMs themselves.
Types of ATM Fees
There can be two ATM fees, one from your own bank, and the other from the operator of the ATM.
The first ATM fee is completely inexcusable and is proof that your bank thinks of you as a cash pinata, and not a savvy customer. This is a fee charged by your own bank to use an ATM. At the bare minimum, your bank checking account should offer you several ATM withdrawals each month without charging you a fee, at least at a large ATM network. This isn’t health insurance. Your own bank should be servicing you, not trying to nickel and dime you for using someone else’s ATM.
Compare that to a checking account at any credit union. For example, Bellco Credit Union in Denver, Colorado offers free ATM withdrawals at network ATMs. Brokerages, like Fidelity frequently may offer free ATM withdrawals from any of their cash management type accounts. (They obviously don’t offer you any sort of free withdrawal that would require you to sell securities.) In fact, while Fidelity does charge a $1 ATM fee from its non-cash management accounts, it waives the first five of every month. In other words, you get five free ATM withdrawals, regardless of network.
If your bank is charging you an out-of-network free for standard ATM withdrawals, you have a bad bank account, and it’s time to switch. If you want to stick with your own bank, check for different account types. Often, a better checking account exists. While these accounts may have some requirements, like a minimum balance, or using direct deposit, it can be worth it.
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ATM Machine Fees
The second type of ATM fee is charged by the ATM. This fee is not charged by your bank, but rather by the ATM operator, who is sometimes a bank. This is the fee that appears on the ATM screen, or sign nearby, and shows up on your receipt. Your $40 withdrawal turns into a $42.50 withdrawal. That might not sound like a lot, but it’s a 6% fee!
To avoid these fees, you must use your own bank’s ATMs, or the network of ATMs your bank participates in.
That’s all well in good when you are in a familiar area, and know your way around, but in new places, it can be harder to find a free ATM. Even worse, at places like airports, concert venues, and other places where they know you aren’t able to pop out to a free ATM, the fees can be downright huge. Fees of $5 or $7.50 can be all too common. And don’t even think of using an ATM in a casino, where the fee is typically over $10.
That $40 ATM withdrawal with a $5 fee is a 12.5% surcharge! Plus, if your bank dings you for another $2.50, that’s an 18.75% charge. It takes a credit card a whole year to charge you that amount of interest!
This is where a premium type checking account can really come in handy.
Higher-level checking accounts at banks and credit unions, as well as at many brokerages offer something called ATM-fee reimbursement. The concept is that when you use an ATM to get money, the ATM operator still charges you $2.50, but your brokerage, or credit union, credits your account back the $2.50, making it a net zero charge for you.
Both Fidelity and Charles Schwab have checking or cash management accounts that offer unlimited ATM fee reimbursements. Chase, Citibank, and Wells Fargo all have premier, preferred, or whatever checking accounts that offer to reimburse some or all ATM fee charges.
Avoiding ATM Fees
Of course, the best strategy to avoid paying ATM fees is to just avoid using ATMs all together. In this day and age, there are more payment options than ever. A debit card takes money from your checking account, just like the ATM does, and it usually does it for free. A credit card does the same thing, and if you pay it off every month is a great way to manage your cash flow. While checks are less popular these days, they still often work in a pinch. Keep a blank check folded up in one of those unused pockets in your wallet or purse for emergencies. I like to keep a few bucks in my wallet for unforeseen events including several ones in case I end up in a tipping situation.
Planning ahead is the best strategy. If you visit your bank once per month to deposit your paycheck, for example, there’s no reason not to get your cash then. Likewise, if you drive by your bank on the way home from work, hit the drive through and make a quick cash withdrawal before the weekend.
The latest way to move around cash without an ATM are the various cash apps. Money apps like Zelle, Venmo, and others allow you to pay your friend or coworker back instantly for that sandwich. You don’t have to remember, and they don’t have to chase you down for that 10-spot.
You should review your banking from time to time, just like you review your insurance coverage. Bank fees can eat up a lot of your hard-earned cash, and in most cases, there is no reason to pay them other than ignorance. Be sure you know what fees you are being charged, when, and why. If you can’t avoid them, find another account, whether at the same bank, or at a different one. Don’t forget credit unions, which are pretty much always a better deal than banks.