True story: A five-year old and his mother are in the toy store:

“Mommy, I want to buy that toy.”

“Sorry, darling, but we can’t afford it.”

“I know where we can get the money.”

“Where?”

“The cash machine.”

My good friend, Mark, has a bad habit he can’t seem to break. Whenever he stops at an ATM, he only pulls out \$20 to \$40 at a time. He insists that’s all he needs to meet his weekly needs.

Of course, his wife also visits the ATM, and she pulls out about the same amount. It wouldn’t be so bad, except by the end of the week, they don’t have the cash on hand to pay the baby-sitter, and someone has to run out again to get more money.

Aside from being a colossal waste of time, his work check gets deposited at a bank that doesn’t have many ATM machines. In fact, there’s one not too far away from his office and nearly none conveniently located near his home. So he and his wife typically end up pulling money from a cash machine owned by another financial institution. That costs them anywhere from \$1 to \$2 per transaction.

I suppose you could justify paying that kind of hefty fee if you were in a real hurry, no other options available, and pulling out, say, \$1,000 (about twice as much as most ATMs will allow us to withdraw in a single day).

But the truth is, it isn’t smart to spend that kind of money on a regular basis. If you withdraw \$100 and pay an average of \$1.50 each time, you’re effectively paying a 1.5 percent tax on your money. That’s quite a chunk of change, and it adds up. For my friend Mark, he might spend \$5 per week on ATM fees, or about \$250 per year.

The Bottom Line

ATMs serve a real purpose. Here are some ways to use ATM machines to the best of their ability:

1. When you take out money, take out real money. Figure out how much cash you go through a week (another good reason to budget), then visit an ATM weekly to take out the money you need. If you’re worried all that cash will burn a hole in your pocket, visit the cash machine on your way home from work, and then leave the money at home until you need it. Even if you already use an ATM that doesn’t charge a fee, you’re wasting valuable time with every visit.

2. Use an ATM that doesn’t charge a fee. The worst place to use a cash machine? A casino. Not only are you taking money out to gamble, but you’ll probably pay a \$2-3 fee for the privilege. Bars are bad and shopping centers — especially if the ATM is the only one around — can be worse. If you look around, you can usually find a machine that doesn’t charge a fee. If a certain bank or financial institution owns an army of ATMs that are convenient to you (and charge a fee for non-members), consider opening an account there. In other words, bring the mountain to Mohammed.

3. It’s a cheap way to get money abroad. If you’re traveling abroad, using a cash machine to get local currency is often cheaper and more convenient than using traveler’s checks, currency exchanges (particularly at the airport) or cash advances on a credit card. Before you leave, make sure your card works in the country where you’ll be traveling and be sure to transfer enough money into the account to cover your expenses while you’re away. Take some traveler’s checks just to be on the safe side, in case you travel in a remote region that doesn’t have ATMs.

4. If you’re really stuck — Of course, if you’re really stuck, take out money wherever you are. Just be sure to keep track of your ATM charges in your financial software. The receipt may indicate you’ve taken out \$101 rather than the \$100 you’ve pocketed.