Pay more with cash, not for cash
A recent survey by Coinstar found that nearly one out of four Americans are using cash more often to pay for purchases than they did just one year ago. The majority of people who made the change (pun intended) said they did so to help with budgeting and debt management.
There is evidence that paying with cash can help people gain financial control. A recent study published by the American Psychological Association confirmed that people spend less when paying cash than using credit. However, this technique is counter-productive if you are paying hefty fees for the privilege of accessing your cash.
Fees and surcharges for using an ATM card add up quickly. In fact, Banks make $10 billion a year in revenue from surcharges (the charge for accessing your account from another banks' ATM). And good luck finding an ATM that doesn't charge a fee. A 2008 Bankrate.com survey found that 99 out of 100 ATMs have a surcharge and that those surcharges are rising. In some areas, surcharges are as high as $3.
The best way to avoid excessive ATM fees is to use them sparingly, especially when they aren’t owned by your bank or credit union. If your only way to get cash is through an ATM that charges extra fees, try to cut down on the number of transactions you make. Take out all the cash you need for the week at the same time. After all, the fees are based on the number of transactions, not the amount withdrawn. Just remember that taking out a week’s worth of money at one time means you have to be disciplined with your spending. (For help, try the envelope method of budgeting using cash.)
Another great way to save money on ATM fees is to take advantage of stores that will allow you to make debit purchases on your ATM card. Even if you have cash on hand, most retailers don’t charge extra for using an ATM card, and many financial institutions waive their own transaction fees as well. If you know you’ll need cash soon, and the retailer has a free “cash-back” option, take advantage of it.
It also pays to know the difference between PIN and signature transactions. Choosing “credit” when you make a purchase allows you to sign your name rather than entering your PIN number. With a signature transaction, you can avoid the fees that some banks charge when using a PIN. According to the FDIC, there also may be differences in how quickly the transaction is posted to your account.
Most important, only use ATMs that carry surcharges and fees when it’s an emergency. Plan a stop at your bank before going to the store. In the long run, it can save you a lot of money.