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Monday, August 25, 2014

All you need to know about cap on free ATM transactions

The RBI's decision to cut the number of free transactions on other banks' ATMs will  have widespread ramifications. Starting 1 November, if you conduct more than  three transactions on other banks' ATMs in a month, you will be charged Rs 20  per transaction. The apex bank has also allowed banks to charge customers if  they use their own bank ATMs more than five times a month. This applies to  transactions in six metros: Mumbai, Delhi, Chennai, Kolkata, Bangalore and  Hyderabad.

The silver lining in the new rules on ATM  usage is that the charge structure has been harmonised. Before the RBI decided  in 2009 to make five ATM transactions free, banks used to charge anything  between Rs 15 and Rs 60 per transaction at another bank's ATM. This was later  revised to Rs 20 per withdrawal and Rs 9 for non-financial transactions. Banks  have been lobbying for the introduction of charges on ATM usage ever since the  RBI allowed this. Thankfully, the RBI has not permitted  banks to have their way and retained the cap on charges for withdrawals.
While Rs 20 per transaction is not exactly usurious, it can add up to a  sizeable amount every month if you are not careful about your cash flow. With  careful planning, you can avoid paying the ATM charges beyond the free  transactions. However, don't go overboard trying to avoid the ATM charge. For  instance, keeping a lot of cash at home to save on ATM fees could prove  counter-productive. In your effort to save Rs 20 in transaction fee, you may  lose a few hundred rupees  in interest.

Besides, it is possible that your bank does not levy charges for using ATMs  frequently. For instance, preferred customers, who hold a large bank balance or  have made investments through the bank, could be allowed more than  three free transactions a month at other ATMs and an unlimited use of the bank's  own teller machines. The change comes at a time when banks are adopting  technology at a furious pace. Most banks now offer customers the facility of  knowing their account balance or getting a mini statement through an SMS or phone banking. So, avoid using the  ATM for nonfinancial transactions that can be done through other  channels.
6 ways to avoid high ATM  charges
Here's how you can avoid the charges that are  likely to kick in from 1 November 2014.
Use cards wherever possible
Your first weapon against  ATM charges is the plastic in your wallet. Use your debit and credit cards so  that you don't need too much cash. Be alert when you do this. Some  establishments charge 1-2% of the amount as transaction fee, which will defeat  the purpose of using the cards. There is also the danger of overspending if you  use plastic money for every purchase.
Plan your cash flow better
Don't wait till you are  broke to withdraw money from the ATM. Give yourself a buffer of 2-3 days by  indulging in advance planning. In this manner, you won't be forced to use  another bank's ATM. While withdrawing cash, take out more than the amount you  need immediately. Take into account the expenses during the coming 8-10 days and  withdraw accordingly.

Prefer your own bank
If your bank's ATM is in the  vicinity, avoid using another bank's machine. Even if you have to walk 50-100  feet, your first choice should be your own bank's ATM. Only if there is no ATM  close to you should you use another bank's ATM. Some banks have apps that can  help you locate their nearest ATM on the smartphone. Make a list of your bank's  ATMs in the areas you frequently visit.
Keep emergency cash
Keep some cash at home in case you  run out of money due to unforeseen expenses. However, don't keep too large an  amount in cash. In your effort to save Rs 20 in ATM fees, you could be losing  out more in interest on that amount. Besides, keeping cash at home is risky.
Start using dormant account
The silver lining is that  the ATM charges will help revive your dormant bank account. Most banks charge a  small annual fee of Rs 80-100 for a no-frill debit card. One debit card will  allow you 36 transactions on other banks' ATMs and 60 at your own bank in one  year. That is much cheaper than the charge imposed by your current bank if you  exceed the cap on transactions.
Use SMS, phone banking for non-financial transactions
The cap on ATM usage includes non-financial transactions, such as balance  enquiry or a mini statement request. Instead of using the ATM for this, take the  SMS route. Most banks offer SMS facility for checking account balance, mini  statements with last five to 10 transactions, and the status of cheques issued  by you.

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