If I told you that I had a way to get up to a guaranteed 25% loss on your money what would you do? If you didn’t punch me in the face your next reaction would probably be laughter. Why in the world would anyone willingly take a 25% loss on their money? Well, most people wouldn’t, but that doesn’t mean it isn’t happening to smart folks like you and me every single day.
In fact, I’m even ashamed to admit that I’ve done it plenty of times without even really thinking about it. It can happen to the best of us and when we are in a hurry or don’t plan ahead you may also be carelessly throwing money out the window without even thinking twice about it. So, how are so many people throwing their hard-earned money away?
Call it a Convenience Fee
As you probably know, not all ATM transactions carry a fee. If you use your own bank’s ATMs, or stay within a particular network, or use a credit union, you may be able to avoid fees completely. But what happens when you aren’t near one of your bank’s ATMs, no credit unions nearby, and you need cash right now? Chances are you’re going to just hit up the nearest ATM. Hey, that’s why ATMs are so great. They are convenient. But this convenience comes at a cost.
Typically, you’ll be assessed a fee by the bank that owns the ATM. It’s not uncommon to see these fees run in the $2-$3 range. In addition, there’s a good chance your own bank is going to charge you a fee for using another bank’s ATM. Again, it could be between $2-$3. But surely, that’s not a big deal, right? Wrong. What if you just stop to grab $20 and you’re charged $2.50 by the ATM and $2.50 by your bank — that’s $5 in fees just to get $20 of your own money. That’s 25% of your transaction!
Ok, so maybe you withdraw $40. That’s still a 12.5% fee. $50 withdrawal? 10% fee. Even at $100 it will cost you 5%. Now, let me ask you this. If you were guaranteed to lose 25, 10, or even 5 percent in any other investment, be it in the stock market or otherwise, there’s no way you’d even consider putting your money there. But an ATM fee? Suddenly people couldn’t care less. It’s amazing what people will do for convenience.
Stop Throwing Your Money Away
Instead of paying a fee just to access your own money you should take some steps to eliminate this behavior at all costs. Here are a few things you can do to help minimize ATM fees in the future.
Consider a credit union. If you’re a member of a credit union and part of the co-op network you have over 28,000 in-network ATMs at your disposal. With such a large number of qualifying ATMs to choose from you have a better chance in finding an ATM near you that won’t cost you a thing. The only drawback is that you still need to have a selection of credit union ATMs around you. In most cities this isn’t a problem, but around here the nearest co-op ATM is over 10 miles away.
Always carry some cash on you. I know a lot of people these days operate virtually cashless, but this is exactly what can lead you to paying unecessary fees in a pinch. Sure, most places will take debit or credit cards, or possibly even checks, but what happens when you’re in an unexpected situation where cash is the only option? No time to run to the bank or maybe the banks are closed, so you hit the ATM. There goes your money. So, make it a habit to keep some cash on you at all times. It doesn’t have to be a lot, but if it’s there in a time of need and keeps you from having to go to the ATM you’ll be thankful you had it.
Plan your cash needs in advance. If you can, try to plan out in advance what your cash needs are for the week and make one large withdrawal at the bank or your bank’s ATM. If you think you’re going to need $100 over the course of the week don’t take out $40 on Monday and assume you’ll just get the rest later when you need it. You’ll probably end up being pressed for time and have no other choice than to get hit with an unnecessary fee.
Use debit card purchases to get cash back. Probably one of the easiest tricks is to get cash back when you make a debit card purchase. You don’t have to be at a bank or even use an ATM for this to work. Simply make a purchase with your debit card and ask for cash back. It doesn’t cost you a thing. The only drawback is that most places will have a limit on how much cash you can get back per transaction. So, don’t go in and buy a candy bar and ask for $200 cash back. It probably won’t work.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.