What is ATM – Full Form, Definition & Uses

Full formed as an Automated Teller Machine, an ATM 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.

What is Automated Teller Machine – Definition

It is a self-service outlet that you can use to withdraw money, check balance or even transfer funds. 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.

Transactions are either free or bear a nominal charge depending upon the banks. You may not be charged for the first 3-5 transactions in a month or you may have to pay a nominal charge if you withdraw money from a bank ATM 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 balance, change the PIN, get mini statements and receive account updates. The more complex units provide facilities of 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 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.

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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-

  • The most common uses of an Automated Teller Machine include withdrawing money, checking balance, transferring money, or changing 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 mobile, and deposit cash. Some of these facilities require you to register at the bank branch
  • Customers can now do money transactions at their convenience. ATMs today are installed in public spaces, highways, malls, market places, railway/airport stations, hospitals, etc.
  • Automated Teller Machines provide 24×7 access anywhere
  • 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. The difference between an ATM card and a debit card is that an ATM card allows only cash withdrawal but a debit card also allows online payments and swipe payments. Most of the time, banks issue one card as both, a debit card & an ATM card. You can insert this card in ATMs to withdraw cash or for other purposes as supported by the particular ATM.

Read More: What is CVV in an ATM Card

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 has a magnetic strip on the back (or 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- A Keypad is given in all ATMs where you can insert numbers to enter the PIN, the amount you wish to withdraw, the type of transaction you want or to cancel the transaction. 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. It acts as a guide to performing a transaction
  • 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. If requested, you get the receipt from the receipt printer
  • Speaker- There is a speaker in most of the ATMs where the audio instructions of accessing the machine & doing transactions are given

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

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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