How Do ATM Machines Work?

Written by brian nelson
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An automatic teller machine (ATM) works like any other vending machine on the inside. There are spots to load the product--paper bills. For ATMs that dispense more than one type of bill--a machine which dispenses both £13s and £6s, each spot must be loaded with the right bills. An ATM that usually will dispense £6 bills may suddenly not allow any £6-based transactions, but will still allow withdrawals of £13 multiples because it is out of bills in the £6 slot.

The physical limitations of each ATM, such as how many bills it can hold, are determined by the manufacturer and are not the same on all machines.

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ATM Cards

An ATM card is simply a plastic card with information stored on a magnetic strip. This information includes your name and bank account information, including routing numbers and account numbers. When you insert your card, the machine reads this data off of the magnetic strip and uses it to process your transaction.

ATM Screen and Keys

The ATM screen and keys are like any other computer and are used to show information to the user and get information from the user. First, the ATM will ask the user to enter a personal identification number. This PIN acts as a password to the card inserted. A double layer of security is achieved to access an account. The user must have both the ATM card and the associated PIN number.

ATM Communications

The ATM itself is a dumb terminal; no banking or account information is stored inside the ATM system. In order to access such information, the ATM must be able to connect to a banking network. The ATM may do this either through a physical connection or with a wireless method, such as cellular. When the user initiates a transaction, the ATM uses the information it read from the ATM card to contact the appropriate banking system. That system accesses information about your account, including whether you are permitted to perform such a transaction and whether there are sufficient funds in your account. The user's banking system will respond with the information required and the ATM machine will report the answer on the screen. The ATM reports back to the home banking system that it has either completed the transaction or not.

ATM Programming

The specific feature set and rules of each ATM is programmed by the ATM owner. Some ATMs may allow only £65 to be withdrawn in a single transaction. Such limits are set on each machine.

Dispensing Money

If the transaction is approved, the ATM machine dispenses the requisite number of bills and if necessary, prints a receipt for the user. The ATM also returns the card at this time. The ATM will beep to remind the user to take the ATM card. After a certain amount of time, most ATMs will retract the card if it is not taken so it won't be found by someone else.

ATM Charges

Whether an ATM charges a fee for withdrawing cash under some circumstances is a choice made by the ATM owner. The ATM can set such a fee and the customer can choose to not continue the transaction after being informed of the fee. Your bank may also set a fee for using another bank's ATM.

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