What is ATM – Definition & Uses

byYashi DasLast Updated: May 30, 2023
What is ATM

An ATM (Automated Teller Machine) is an electronic machine used for financial transactions. As the term implies, it is an ‘automated’ banking platform that does not require any banking representative/teller or a human cashier. Let’s learn more about an ATM, its benefits and uses in this blog.

What is Automated Teller Machine?

ATM stands for Automated Teller Machine which is a self-service banking outlet. You can withdraw money, check your balance, or even transfer funds at an ATM. Different banks provide their ATM services by installing cash machines in different parts of the country. You can withdraw money from any of these machines irrespective of whether or not you are an account holder in the same bank.

ATM transactions are either free or bear a nominal charge depending upon the banks. Banks usually do not charge for the first 3-5 ATM transactions in a month. Once you cross the limit of free transactions, you may have to pay a nominal charge. Also, some banks levy charges if you withdraw money from the ATM of another bank of which you are not an account holder.

Types of Automated Teller Machines (ATMs)

Automated Teller Machines (ATMs) are mainly of two types. One is a simple basic unit that allows you to withdraw cash, check your balance, change the PIN, get mini statements and receive account updates. The more complex units provide facilities for cash or cheque deposits and line of credit & bill payments.

There are also onsite and offsite Automated Teller Machines- the onsite ATMs are within the bank premises, unlike the offsite ones which are present in different nooks and corners of the country to assure that people have basic banking facilities and instant cash withdrawals if they can’t go to a bank branch.

ATMs can also be categorized based on the labels assigned to them. Some of these labels are listed below-

  • Green Label ATMs- Used for agricultural purposes
  • Yellow Label ATMs- Used for e-commerce transactions
  • Orange Label ATMs- Used for share transactions
  • Pink Label ATMs- Specifically for females to help avoid the long queues and waiting time
  • White Label ATMs – Introduced by the TATA group, white label ATMs are not owned by a particular bank but by entities other than the bank
  • Brown Label Banks- Operated by a third party other than a bank

There are also a few biometric Automated Teller Machines that need fingerprints & eye scanners to be operated.

Read More: Forgot ATM PIN – How to Reset it

Uses of an Automated Teller Machine

Automated Teller Machines have revolutionized the banking sector by providing easy access to customers and loading off the burden from bank officials. Some of the uses of an ATM are-

  • Most commonly, usres can withdraw money and check their account balance at an ATM. Bank account holders can also transfer money or change the PIN (Personal Identification Number)
  • Newer and advanced ATMs also provide options to open/withdraw a Fixed Deposit (FD), or to apply for a personal loan. You can also book railway tickets, pay the insurance premiums, income tax & utility bills, recharge your mobile, and deposit cash. Some of these facilities may require you to register at the bank branch
  • Customers can perform direct transactions at their convenience. Banks have installed their ATMs today in public spaces, highways, malls, marketplaces, railway/airport stations, hospitals, etc.
  • Automated Teller Machines provide 24×7 access anywhere and at any time
  • ATMs help to avoid the hassle of standing in long queues at the bank even for simpler transactions like withdrawing money. It has also helped in reducing the workload of the bank officials

How to Use ATMs?

To avail of the facility of Automated Teller Machines, you need to have a bank account and an ATM card against the account for the same. Most of the times, banks issue a debit card that you can use not only at ATMs but also at online payment gateways or card swipe payments.

Every Automated Teller Machine has some common basic parts, even if they may differ in size and design. These are:

  1. Input Devices
  • Card Reader – Every Automated Teller Machine has a space to insert the debit or the ATM card. The ATM card generally has a magnetic strip on the back, and in a few cases, a chip on the front, that contains the account details. Card Reader recognizes these details and passes them on to the user server
  • Keypad – All ATMs have a keypad where you can insert numbers, clear them, or cancel any transaction. You can use it to enter the PIN and the amount you wish to withdraw. These keypads can either be physical buttons on the ATM or virtual keypads on the touchscreen
  1. Output Devices
  • Display Screen – There is a display screen in every ATM, usually LCD or CRT that displays the transaction information like steps to do the transaction or balance after withdrawal. Therefore, it acts as a guide to performing a transaction. It displays options of PIN change, quick cash withdrawal, balance check, etc.
  • Cash Dispenser – Cash is safely stocked into the Automated Teller Machine by bank officials. There is a cash dispenser from where you can collect cash after withdrawing a certain amount from the ATM
  • Receipt Printer – After completing a transaction, the receipt printer in the ATM records the type of transaction, amount withdrawn, and the remaining balance. In an ongoing transaction, ATMs generally display the question if the customers want the receipt or not. So, if requested, you get the receipt from the receipt printer
  • Speaker – There is a speaker in most of the ATMs which gives the audio instructions for accessing the machine & doing transactions. Therefore, it further enables the users to perform the transaction smoothly

How can you Operate an ATM?

Here’s a step-by-step guide on how to operate an ATM:

  • Approach the ATM: Walk up to the ATM and ensure that the surrounding area is safe and well-lit. Be cautious of anyone behaving suspiciously nearby.
  • Insert your card: Locate the card slot on the ATM and insert your debit or credit card with the card’s magnetic strip facing down or the chip facing up, depending on the type of card and ATM. Follow the on-screen instructions if any.
  • Enter your PIN: Once the card is inserted, the ATM will prompt you to enter your Personal Identification Number (PIN). Carefully enter your PIN using the keypad provided. Ensure that you shield the keypad with your hand or body to prevent others from seeing your PIN.
  • Select your transaction: After entering your PIN, the ATM will display a menu of transaction options on the screen. Common options include withdrawals, deposits, balance inquiries, and fund transfers. Select the transaction you want to perform by pressing the corresponding button on the keypad.
  • Follow on-screen instructions: The ATM will provide step-by-step instructions for each transaction. Read the instructions carefully and follow them accordingly.
  • Withdrawal: If you choose to withdraw cash, enter the amount you wish to withdraw and confirm the transaction. The ATM will dispense the requested amount in cash.
  • Deposits: If you want to deposit cash or checks, the ATM will guide you on the specific procedure. Some ATMs require you to insert checks or cash directly into designated slots, while others may provide envelopes for you to place your deposits.
  • Transaction completion: Once you have completed your transaction, the ATM will display a summary of the transaction details on the screen. Take note of any important information or receipts provided.
  • Collect your card and cash: After completing your transaction, the ATM will return your card. Remember to take your card back from the machine. If you made a cash withdrawal, collect the dispensed cash as well.
  • Confirm your transaction: Take a moment to confirm that you have collected your card and cash before leaving the ATM area. If there are any issues or discrepancies, contact your bank immediately.

It’s essential to always be cautious and aware of your surroundings when operating an ATM. Shield your PIN entry, avoid sharing your PIN with others, and keep your transaction receipts for future reference.

To Conclude:

ATMs have multiplied the accessibility and convenience of the people. It helps people to have cash in times of urgent need. It is useful especially when you are not at the place of your bank branch where you hold an account or when banks are closed. You can withdraw cash even on bank holidays or after work timings because you are not dependent on them.

Read More: What is CVV in an ATM Card

Can I use an ATM card abroad?
Yes, you can. Depending upon your card association (Visa, MasterCard, or Plus) you can use an ATM card in a foreign country. The money debited will be in Indian currency depending upon the exchange rate that day and there may be an overseas fee for performing a transaction.
Are there any hidden charges in transactions through ATMs?
There are no hidden charges but there’s a nominal charge for transactions after the limit of free transactions is passed. Normally, there are 3 or 5 free transactions in a month, depending on the bank.
Is an ATM safe?
Yes, it is absolutely safe to withdraw money from an ATM. Make sure you do not share your PIN with anyone or fall prey to fraudsters.
What is a Floating ATM?
A floating ATM is one that is set up on a ferry, ship, or a similar water body vehicle. India’s first floating ATM was first launched in Kochi, Kerala by SBI.

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