Traditional banks still play a major role in Americans' financial lives, and tens of millions of customers still have basic checking and savings accounts that are important in helping them handle their daily finances. As consumer preferences have shifted, though, banks have had to adjust the way they make money. The result has been a big boost in a much-hated bank fee -- even as many people discover that their need to pay it is going down rather than up.

Paying for convenience

The latest annual survey of the banking industry from Bankrate shows that ATM fees climbed to a new record in 2017, marking the 11th year in a row that the typical cash machine fee hit unprecedented levels. Nearly all banks offer their own in-network ATMs free of charge to their customers, but if you try to get cash from a different ATM, then you'll have to pay for the privilege. In fact, you'll typically have to pay two fees: one to your bank and another to the bank or other financial institution that operates the ATM.

Bankrate said that the total amount for out-of-network ATM fees rose to $4.69, up almost 3% from the previous year. That breaks down to a $2.97 average fee from the company owning the ATM, and $1.72 from the customer's own bank as a surcharge for going outside of its ATM network.

Printout from a passbook savings account.

Image source: Getty Images.

Heading toward a cashless society?

The irony with ATM fees is that advances in payment technology have made cash much less of a necessity for most people. Credit and debit cards have been around for decades, and incremental adoption year after year has led toward a reduced need for cash among card users.

Yet the real progress has come from mobile payment technology. More people pay for items now with their smartphones, even for small-ticket items. As merchants invest in the equipment they need in order to accept mobile payments, they start to encourage such payment methods for their ease of use. Cash hasn't disappeared as a medium of exchange, but if you don't want to use cash, there are plenty of ways avoid having to use it.

Interestingly, it's precisely because cash is in less demand that banks have boosted their fees. With fewer people needing to go to an ATM, banks are faced with a revenue source in secular decline. They've followed the time-honored strategy of charging the remaining customers more for the privilege. How far that can go remains to be seen, but many bank customers still find themselves in positions in which they'll pay an egregious charge to get even modest amounts of cash.

Why you should never have to pay an ATM fee

Just because ATM fees are on the rise doesn't mean you have to be a victim of your bank. There are many things you can do to ensure you'll never end up on the hook for an ATM fee.

  • Most banks have networks of ATMs that you can use with no fee. Mobile apps and other tools can make it easier to find the nearest in-network ATM. Sometimes, you'll be able to find a cash machine within a block of your current location to save you nearly $5.
  • Many online banks offer rebates of ATM fees to their customers. Rather than paying to maintain a national network of cash machines of their own, online banks actually save money by reimbursing their customers for the fees that they incur at competing banks' machines.
  • You can reduce the amount of cash you need by taking advantage of alternative payment methods. Even if you're not comfortable with a credit card because of fears that you won't be able to control your spending, you can use debit cards in the same way you might use a check. Mobile payment systems can also get tied directly to bank accounts.

Be smart about your money

As the average ATM fee approaches the $5 mark, paying for a cash machine has gotten too expensive to put up with as a regular expense. By understanding the motivations that banks have to get you to pay, you'll be in a better position to fight back and avoid unnecessary costs for ATMs and similar services.

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