How Does an ATM Machine Work?

by Contributing Writer ; Updated September 11, 2017

What is the ATM?

An ATM (Automated Teller Machine) is a computerized system individuals can use to deposit money into their banking accounts, withdraw money from their accounts, check balances and transfer money from one account to the other. ATMs can either be part of a specific bank (a Suntrust ATM, for example), or an independent entity that has contracts with several banks and credit card companies (a Presto machine, for instance). The former are usually found in stand alone booths or on the outsides of a bank, while the latter are usually found in other public places, such as grocery stores and malls.

How an ATM Works

In order to access various accounts, ATM computers are connected to complex interbank networks, which allows customers from many different banks to access their accounts through the machine. There are several of these interbank networks; among them are Cirrus and LINK. In order to provide access to the customer, ATMs rely on authorization from the financial institutions. To cover the costs of operation and the fees that involve belonging and accessing the networks, most independent ATMs charge a fee for each transaction. These fees usually range from seventy-five cents to two dollars.

The ATM Breakdown

The ATM is made up of much more than a computer, however. In order to perform all of its functions, the ATM has many different parts. These include the computer, which includes the interface and the keypad for the customer to use, and a magnetic card reader. The latter allows the machine to read the magnetic strip on the back of a customer's debit or ATM card. The machine will also include a display screen, function buttons (usually placed near the screen and covering the functions of saying "yes," "no," and "cancel"), a printer and a cash drawer. Depending on the ATM, it may also provide envelopes for deposits and security cameras.

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