Why Do Banks Charge Money for Using Their ATM Machines?

There’s no mystery about the motivation behind automated teller machine (ATM) fees – they make money for banks that have seen their profits squeezed by low interest rates.

The Federal Reserve Bank of Cleveland reports that much of the revenue banks earn stems from noninterest income, including overdraft and ATM fees. Some portion of ATM fees defrays the costs banks experience purchasing and maintaining ATMs and their supporting infrastructure. The ATMs help generate profit through both fee income and cost savings.

The standard ATM fee definition is the set of charges customers pay for using ATMs. These fees largely result from out-of-network transactions and excessive withdrawals.

A bank considers “in-network” ATMs to be the machines they own and/or the ones owned by a third-party ATM network to which they subscribe. Generally, you won’t pay an ATM transaction fee at an in-network machine unless you exceed the bank’s monthly quota for free withdrawals. No regulation requires that a bank impose a monthly quota on free ATM transactions, giving the banks wide latitude to set limits and then collect ATM charges for cash withdrawal activity exceeding the limit.

The COVID-19 pandemic caused the suspension of federal rules limiting to ​six​ the number of monthly savings account withdrawals. But to be clear, any additional fees due to excessive savings account withdrawals were only incidental to ATM usage, as they also applied to withdrawals via checks, transfers and teller transactions.

Out-of-network fees include ATM withdrawal charges from other bank ATM networks. They may also include fees for balance inquiries, transfers, deposits and any other ATM transactions. Out-of-network ATM fees include:

• ​Non-network fee​: The charge your bank assesses you for using an out-of-network ATM, usually ranging from ​$2 to $3.50​ per transaction.
• ​Operator’s fee​: The bank or company owning the ATM charges this surcharge to non-customers. While banks usually charge from ​$1.50 to $3.50​ per transaction, non-bank operators charge ​up to $10​ per use. If you’ve ever used an ATM in a Las Vegas casino, you know how high these fees can mount.
• ​International transaction fee​: Withdrawing money from a foreign ATM may cost you 3 percent of the amount withdrawn plus a flat fee of ​$2 to $7.​

ATMs directly charge out-of-network users the operator’s surcharge or international transaction fee. Banks charge your account for any non-network fees.

ATMs do more than generate cash flow for out-of-network transactions. They also let banks save money in several ways:

• Reduce withdrawals mediated by human tellers at your bank branch, thereby increasing efficiency.
• May reduce teller headcount by offloading withdrawals, deposits and balance inquiries to ATMs.
• Around-the-clock fee generation not limited to the bank’s hours of operation.
• Smaller requirement for physical space and more efficient space utilization at bank branches.

ATMs don’t sleep, go on vacations, call in sick, go to lunch, take coffee breaks or stop working when the bank closes. They are dependable, ideally suited for their job, don’t need bathroom breaks and don’t engage in office politics. Some even talk to customers. It’s no wonder banks invest millions in these capable machines.

​Read More​: Benefits & Risks of Using ATM Machines

You can avoid ATM fees in several ways:

• Use your bank’s mobile app to identify nearby in-network ATMs.
• Get cash back for free on the check-out line at groceries and other stores.
• Withdraw more money each time and reduce the frequency of ATM use.
• Switch to a bank or account type (such as free checking) that doesn’t charge non-network fees and/or reimburses you for ATM operators’ fees.
• Check your account balances online and in-app, not at ATMs.

​Read More​: What Is a Free Checking Account's Balance Inquiry Fee?

ATM fees can mount quickly. Accordingly, many customers choose their bank and plan their cash withdrawals to avoid those pesky ATM fees whenever possible.

​Read More​: How to Choose a Bank That's Right for You