An automated teller machine, much more commonly known as an ATM, is an electronic machine that allows you to perform several basic banking transactions, including withdrawing cash and depositing funds, without being limited to a bank’s operating hours or physical location.
ATMs have helped revolutionize the banking industry, and the MarketWatch Guides team takes a deep dive into the evolution of the machines from inception to present day.
Key Takeaways
- Automated teller machines were first introduced in 1967 in London by Barclays Bank and two years later, the first U.S. ATM debuted in Long Island, dispensing cash to Chemical Bank customers.
- ATMs today perform a variety of banking services, from taking deposits and cash withdrawals to allowing customers to transfer funds or review their account balance.
- Modern banking has evolved as ATMs have become more sophisticated, allowing customers to access their funds outside of typical banking hours and perform other transactions without the need to visit a branch.
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What is an ATM?
The earliest automated teller machines were essentially cash-dispensing machines designed to expedite getting money out of your bank account. They became the natural successor to drive-up tellers, and both banks and consumers benefited from the convenience.
Today, using an ATM simply requires you to insert or tap your debit card at the machine and enter your personal identification number (PIN) number on the touchscreen. However the first iterations of an ATM required customers to insert a special type of carbon-14 infused check into the machine and then enter their PIN on a numeric keypad. The machine would match the customer’s PIN against their account to verify their identity before dispensing the cash.
The invention of the magnetic stripe or “mag stripe” paved the way for the modern debit and credit card as these small strips on the back of a plastic card could contain a trove of data that was encoded and read by machines designed to process this information, including payment terminals and ATMs.
What was once revolutionary is now commonplace as there are millions of ATMs in use worldwide that allow you to perform a variety of basic banking functions from a touchscreen, although the basic concept is still the same: Share your debit card information with the ATM and then enter your PIN before making any transactions.
Basic Functions of ATMs
Most ATMs allow you to withdraw cash. Depending on the bank or credit union, owner of the ATM and the location, you may also be able to:
- Deposit checks
- Deposit cash
- Transfer money between accounts
- Pay bills
- Check your balance
ATMs continue to evolve along with technology. For example, many ATMs will make a sound and won’t return your card until you take your cash, preventing you from leaving your card in the machine. Some machines are equipped with near-field communication (NFC) technology so you can wave your card at the machine rather than insert it.
Some bank-owned ATMs allow you to access an ATM without a physical card but instead by using their bank app on your smartphone or having your PIN sent to you via text messaging. As technology advances, consumers may find that ATMs become more technologically advanced for a better user experience.
ATM Transactions
To use an ATM, you’ll need to insert your debit card into the card reader. If both your machine and card are equipped with NFC technology, you can hold your card near the reader. After entering your PIN on the keypad or touchscreen, you’ll be directed to a menu of options.
To withdraw money, select that option and enter the amount you wish to withdraw. Within seconds, the ATM will electronically relay information back and forth between your bank to determine if you have enough funds to cover the withdrawal and if so, it will debit the amount from your account and dispense your cash through a dispenser that uses sensors to ensure the correct amount is given to you.
If the ATM you’re using allows you to deposit money, whether it’s cash or a check, select the deposit option and enter the amount of money you wish to deposit. Some banks require you to put cash in an ATM envelope first, while others accept bills. If you’re depositing a check, be sure to endorse the back of it. There should be a designated slot to insert your deposit when the ATM prompts you to do so.
Other transactions you may be able to do include transferring money between accounts, checking your account balance or paying bills if your account and ATM are set up to do so.
It’s also possible in many cases to use a credit card at an ATM to withdraw money, but credit card issuers consider this a cash advance and charge interest rates that are often higher than what you’d pay on a regular purchase with your card.
Be aware you may be charged ATM fees for transactions unless it’s within your bank’s ATM network. These fees can range from $1 to $5 and will depend on the policies of both your bank and the ATM you’re using. Some banks will reimburse you if you use an out-of-network ATM, but it’s best to know any limitations or additional fees.
Safety and Security Measures for ATM Usage
Like any financial transaction, using an ATM comes with some level of risk. Safety and security are paramount, so make sure the ATM you’re using is secure and in a safe location.
You may want to take a close look at the card reader where you insert your ATM card to see if anything looks suspicious, ill-fitting or loose as thieves can use skimmers that fit over the bank’s equipment that can “skim” your card information and PIN after you’ve entered it.
When possible, use an ATM in a location like a bank’s lobby or a secure location that is likely to have surveillance cameras and deter any fraudulent activity.
The Bottom Line: Automated Teller Machine
Automated teller machines were and continue to be a major advancement in consumer banking technology. Using an ATM is more efficient for customers, who no longer need to wait in person at the bank to conduct basic transactions. ATMs are also more efficient for banks that don’t need as many tellers on staff during peak banking hours.
FAQ: What Does ATM Mean?
ATM in banking stands for automated teller machine.
An ATM is a banking machine that lets you do some basic financial transactions including depositing or withdrawing cash or checking your account balance. They work by “reading” the information on your ATM card and electronically passing information back and forth between the ATM and your bank account.
Yes, an ATM is safe to use. We recommend being vigilant about your surroundings and ensuring the safety of your information when you input your PIN into the machine. Also, take a close look at the card reader to make sure it’s secure.
**Data accurate at time of publication
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