With ATM withdrawals set to get costlier, reduce dependence on cash

Come January 1 and bank customers will have to cough up more for cash withdrawals from automated teller machines (ATMs). The cap on ATM transaction fees imposed by the Reserve Bank of India (RBI) was last revised in August 2014.

Gaurav Aggarwal, senior director, PaisaBazaar, says, “There has been a substantial increase in the cost of deploying and operating ATMs since the last revision. Hence, the RBI has increased the upper limit on the fee that banks and white-label ATM operators can charge on transactions by Rs 1 to Rs 21 per transaction from January 1, 2022.”  

Higher charges on exceeding free limit

ATM users who exceed the monthly free limit on ATM transactions will experience a marginal increase in their overall ATM transaction costs. Customers will continue to get five free transactions per month at their own bank’s ATMs (these includes both financial and non-financial transactions). They will also get three free transactions at other bank ATMs in metro areas and five in non-metro areas.

This new rule does not apply to all kinds of ATMs.

Nipun Jain, chief executive officer (CEO), RapiPay Fintech, a company in the assisted payments space, says, “Customers withdrawing cash using our microATMs and Aadhaar-enabled payment system (or AePS) will not be affected by the recent RBI guideline on increasing ATM transaction charges.”

Ways to minimise impact

First, check with your bank the number of free ATM transactions permitted in your account.

Adhil Shetty, CEO, BankBazaar, says, “Some banks waive charges for preferred customers. If you are one, you may be able to get a higher number of free transactions.”

Avoid using the ATM to conduct non-financial transactions.

“Avoid transactions, such as checking account balance. These will also count against your free monthly quota. Conduct these transactions on your smartphone,” says Shetty.

Another way to avoid incurring higher ATM transaction fees is to make payments through wallets, debit/credit card swipes, and internet banking, to the extent possible.

Currently, some prepaid payment instruments and wallet companies charge customers anywhere between 2 per cent and 2.5 per cent for loading. Customers don’t have to pay any charges for using debit and credit cards. It is the merchants who are charged for payments made through credit cards.

“If you have multiple debit cards, use the ones that offer free or a higher number of ATM transactions,” says Aggarwal.

Monitor usage of the other debit cards, so that you don’t exceed the upper limit on any one of them.

Shetty suggests that customers integrate unified payments interface (UPI) more deeply into their lives. There are several disincentives now for using petty cash, and clear incentives for digital payments, which are free and available 24x7.

“It is anyway difficult to withdraw beyond 20,000 at one go from ATMs. They are programmed to expend up to 40 notes in a single transaction, and the highest denomination available is usually Rs 500,” adds Shetty.

How much cash is too much

Many people nowadays prefer digital payment instruments, credit and debit card swipes, and internet banking over cash transactions.

“If you live in an urban area where most merchants around you accept UPI or card payments, it’s possible to make a very small amount of cash — a few thousand rupees — last for months,” says Shetty.

Some experts believe that keeping the third pandemic wave in mind, some cash in hand is a good idea. As a thumb rule, one should have hard cash equal to one month’s expense at home. This amount will come in handy in case a strict lockdown is imposed and banks and ATMs are shuttered, or withdrawing frequently isn’t feasible. International financial advisors usually suggest having at least a day’s worth of expenses as cash in the wallet.

Transact safely at ATMs

• Use your hand to cover the keypad while entering the PIN at an ATM or Point of Sale (POS) machine

• Never share your PIN/card details

• Never write the PIN on your card

• Do not respond to text messages, emails or calls asking for your card details or PIN

• Do not use numbers from your birthday, phone or account number as your PIN

• Dispose of or safely put away your transaction receipts

• Look for spy cameras before you start your transaction

• Beware of keypad manipulation and heat mapping while using the ATM or POS machine

• Sign up for transaction alerts

Source: State Bank of India