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Cut the Cost of Cash

What would you do if I took your paycheck, stuffed it under my mattress, then demanded money every time you wanted a little bit of cash? You'd probably have me arrested for extortion. Yet millions of us fork over fees to a bank every time we visit an ATM.

If you think paying a dollar or two for the convenience of easy money is no big deal, consider this: Some people are paying $4.25 just to get a wad of greenbacks into their wallets. That's way too much to pay for your own money.

Fees upon fees
As the Sacramento Business Journal recently reported, anyone who sidles up to a Bank of America (NYSE: BAC  ) ATM had better be a customer. If not, you'll probably fork over $3 for the privilege of using the company's machine to get your money.

To add insult to injury, you'll almost certainly be punished by your own bank for straying from home. According to the most recent Bankrate survey, you'll pay another $1.25 on average to your financial institution for not using its own ATMs. That adds up to $4.25 just to get a little cash for a spur-of-the-moment movie and popcorn, or that irresistible beef burrito slathered in salsa and sour cream.

Oh, and don't think I'm singling out Bank of America as the only culprit among financial institutions. Bankrate found that on average, banks charge non-customers an average $1.64 for using their ATMs.

Keep your money
Inflation may be taking its toll on a dollar's value, but you can still get a lot for $4.25. You could download a few tunes to the iPod. Splurge on the fanciest coffee concoction at your local java joint. You can probably even find lunch, if you're not too picky.

Bank fees add up to great revenue for financial institutions and potential profits for anyone who buys shares of these giants. A quick look at the latest quarterly reports from some of the largest banks, including US Bancorp (NYSE: USB  ) , Wells Fargo (NYSE: WFC  ) , and Citigroup (NYSE: C  ) , makes it absolutely clear how important income from these and similar fees are to bolstering their bottom line -- especially with overall loan quality on their core lending businesses being called into question.

But if you're not profiting from bank stock ownership, ATM fees just siphon your money into someone else's account. The banks say that those fees are the price of convenience. But if you think that's too high a price to pay, try these ideas for limiting your emergency out-of-network ATM withdrawals:

1. Become a regular. Make a weekly date with your own bank's ATM. If you get into the habit of withdrawing money regularly, you'll be more likely to have cash in your pocket when you need it. You'll be less likely to get stuck with an empty wallet and only foreign ATM machines in sight.

2. Map your cash. Ever withdraw money from another institution's ATM, only to walk a block and run into your bank's machine? Get familiar with the bank branch and ATM locations in your usual haunts. Print out a list of area ATMs and keep it in your car, briefcase, or purse for adventures further afield.

3. Trash the cash. There's almost no place left that won't accept some form of plastic as payment these days. If you're stuck without cash, your debit card can almost certainly suffice, but be wary of paying for everything with a credit card if your wallet's always empty.

4. Buy and bank. Some stores will let you get cash back when you make a debit card transaction to purchase goods. This may be an easy and convenient way to get your hands on some money. Just make sure you won't pay a store or a bank fee for the transaction.

5. Fire your bank. If you know you're not the type to pay a lot of attention to fees, pick a bank that won't nickel-and-dime you with every transaction. Shop around for a checking account with low or no fees for ATM transactions. See if there's a credit union that might give you a better deal than your local bank. Some banks, such as E*Trade Financial (Nasdaq: ETFC  ) , even offer fee refunds if you use another bank's ATM. Visit the Banking Center for a little Foolish advice.

Then, go spend that $4.25 you saved on ATM withdrawals on something more fun -- like Bank of America stock.

Related Foolishness:

Bank of America and US Bancorp are Motley Fool Income Investor recommendations. To learn more about how you can start collecting some of those bank fees for your own portfolio in the form of regular dividends, sign up for a 30-day free trial today.

Fool contributor Mary Dalrymple has no first-hand experience with extortion, but she does enjoy "The Sopranos." She does not own stock in any company mentioned in this article, and she welcomes your feedback. Bankrate is a Rule Breakers selection. The Motley Fool has a law-abiding disclosure policy.


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