Tag Archive for: surcharge fee

Is an ATM Business Profitable: How Much ATM Business Owners Make

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Is an ATM business profitable? Well, yes. Otherwise they wouldn’t exist! Not all ATM machines are owned and operated by financial institutions. Many ATM machines are owned and operated by independent ATM deployers (IADs). 

An IAD’s main source of revenue comes from the surcharge fee imposed on transactions. However, there is more than one way to own (and profit from) an ATM business. When simplified, ATM business profit comes down to a few factors: location, transaction volume, surcharge fee, and operating costs.

For any business, the goal is to maximize revenue and minimize costs. The difference equals profit. In this article, we’ll provide you with a few formulas you can use to calculate ATM business profit. But we’ll also provide you with a look at other ways to make money in the ATM business. Keep reading to learn how to make your ATM business profitable.

How to Calculate Your ATM Business Profit

There are a couple of rules of thumb you can use to gauge how much money your ATM might generate. However, remember that there are many factors that can affect the success and profitability of a location (more on that later). So no location is a guarantee. These formulas simply help to give you an idea of whether or not a location is a good fit and what you can expect in terms of revenue. 

Rule of Thumb #1

The first rule of thumb says that approximately 2-3% of people that actually see an ATM machine in an establishment will likely use the ATM. Say, for example, that your location has an average of 200 customers visiting each day. One would expect or speculate that approximately 5 of those 200 people would use that ATM daily.

You can then take that number of people and multiply it by the amount of your surcharge. If you take that number and multiply it by how many days the location is open during the year, you’ll be able to estimate how much money your machine might make in a year. You can also get a monthly revenue estimate. 

(5 x Surcharge Amount) x Days Open Per Year = ATM Revenue Per Year

Use the calculator here to help do the math more quickly.

Rule of Thumb #2

The second rule of thumb suggests that the number of adult patrons an establishment has in a given day—plus or minus 10%—will use the ATM on a monthly basis.

This rule of thumb is more commonly followed if the establishment accepts credit cards or gives cash back at the point of sale (POS). However, alternate payment methods will affect ATM usage but will also convert some users to cash. This also helps lower credit card fees the establishment pays. Usage could be affected by as much as 20%-40%.

# of Adult Patrons Per Day +/- 10% = # of ATM Uses Per Month

Use the calculator here to help do the math more quickly.

Basically, once you purchase an ATM machine and set it up with processing, it could pay for itself in less than a year if it’s in a good location. It could pay for itself in as little as a few months in a great location. After that, you begin to profit!

The Location Factor

A high-quality location makes an ATM business profitable. While it is actually very difficult to lose money with an ATM business, the sooner your machine pays for itself, the sooner you can begin to make a profit. 

An ATM can be installed anywhere. But for it to be successful, there has to be a need for the service. That means that the more people who both have access to the machine and need cash, the more profitable your ATM business will be. 

So, when selecting a location for your ATM, look for places that see a lot of business or foot traffic, aren’t near direct competition, and offer opportunities to spend money. Cash-only locations are even better and can automatically increase your profit estimates. 

Once you are in business, you will make money every time the machine is used. But you have to make sure that you get enough transactions in a month to cover operational costs.

Operational Costs

Fortunately, there aren’t a ton of operational costs to consider each month. Essentially, you’re looking at travel costs to and from the location, receipt paper and cleaning supplies, and maybe wireless service and general liability insurance. 

If you make more revenue from your machine than what it costs you to operate your business each month, you will profit. 

Don’t forget to factor in revenue share when estimating your profit. If the location receives a portion of the machine’s surcharge revenue, add that to your operational costs if you calculate your profit based on the flat surcharge fee. Or, you can adjust the surcharge in your calculation based on the share that you receive.

Remember, too, that you will have a couple of thousands of dollars tied up in vault cash. This is the cash that you load into the machine to be dispensed each transaction. It’s a good idea to add that amount to your startup costs when determining your ROI goals.

Revenue Streams That Make an ATM Business Profitable

Surcharge

IADs make the bulk of their revenue from the surcharge fee imposed on ATM transactions. The average surcharge fee is about $3-$3.50. Ultimately, this decision is yours. Although, some location owners will want a say in how much to charge their customers for ATM service. So you will work together to find a number that works for everyone. You want a rate that is competitive but that also pays the bills….

Scale

To really make an ATM business profitable, place more than one machine. On average, if you want to earn $1,500 per month from your ATM business, you’ll need 5-7 ATMs in average locations. 

Not all locations perform equally. Obviously, 2 or 3 great locations will make your ATM business profitable faster. But every IAD has a few good ATM locations, a few slow ATM locations, and a few great ATM locations. If your machines have a topper, a wrap, or custom screen graphics, you might also be able to increase your revenue by selling ad space. Then you’ll really be in business!

Other Opportunities in the ATM Business

There are other ways to make money with an ATM business besides owning and operating your own machines. You can really assume responsibility for any one part of the process and hire yourself out to others in the industry.

For example, you can be an ATM site locator. This is someone who negotiates with location owners on behalf of ATM owners. Someone who wants to own and operate an ATM machine but doesn’t want to put in the effort of finding a location can hire a site locator.

A site locator typically does not own any machines but matches locations and ATM owners. In exchange, an ATM site locator can request a flat rate or negotiate for a share of the surcharge from the ATM owner. You could potentially be a site locator as well as an IAD if you wanted to make extra money without managing more machines.

You could also be an ATM vendor, or salesperson. There are business owners who want an ATM machine on site and want to operate it themselves rather than working with an IAD. You would explain ATM options and add your commission rate to the cost of the equipment to make your profit.

Or, you can be an ATM vaulter. If you have access to cash, you can partner with ATM providers to offer cash vaulting services. You would travel to each ATM and make sure it’s stocked with cash. To calculate your profit potential, you could charge a flat rate or create a fee schedule based on distance and travel time.

An ATM Business Is Profitable

If you’re considering an ATM machine or want to get into the ATM business as a side hustle to earn some extra cash or as a passive income, you need at least 3-4 people per day to use your ATM (if it’s available 7 days a week) to pay for the machine and make a few bucks. If you’re looking to make salary-level income, consider scaling your business and placing 5-7 machines.

It is difficult to provide an exact number or even range for how much ATM business owners make. But we can provide you with some guidelines to help you predict your own earning potential based on your location and opportunities available to you. An ATM business is very customizable and therefore very difficult to generalize. But if you follow industry trends, there is really no way you can lose.

Despite certain challenges to an ATM business like location negotiation, competition, and technological advancements in payment platforms, where there is a need for cash there is an opportunity for you to make money. So if you’re a motivated entrepreneur who doesn’t quit too soon, then the ATM business is for you. 

Most people fail because they quit too soon. If your first locations are slow, don’t get discouraged. You can always move them to better locations!

For detailed guidance at every stage of the ATM business process from an ATM business mentor and ATMDepot.com CEO himself, check out the ATM Business Road Map. You can try it risk-free for 30 days. And you don’t have to complete the course to get started right away!

ATM Card vs. Debit Card: What’s the Difference?

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You might have to consider ATM card vs. debit card when opening a new bank account. But many people consider these two cards the same and use the names interchangeably. However, they are different types of cards with distinct purposes and functions.

In this article, we’ll discuss the similarities and differences between ATM cards and debit cards as well as the benefits of each. The distinction is important when it comes to making purchases, withdrawals, and sales. 

ATM Card vs. Debit Card: Similarities

Both ATM cards and debit cards are rectangular pieces of plastic issued by your bank and tied to your checking and savings accounts. This means that they can both be used at an ATM with a PIN to check account balances, transfer funds, withdraw cash, and even make deposits. 

ATM Fees

The fee structure for both is also similar. Both ATM cards and debit cards can be used on any ATM machine. But you can incur ATM usage fees on machines outside of your bank’s network. Many times, ATM usage fees are waived at ATMs that are in-network. But banks can charge fees to cover the cost of communication with an out-of-network ATM. And the owner of the out-of-network ATM machine can impose a surcharge fee on top of that.

Overdraft Fees

You can also incur overdraft fees with each card. Usually, overdraft protection is not automatic—it’s a service you opt into. Overdraft protection service allows you to make purchases and withdrawals beyond your account balance. However, there is a fee charged each time the bank covers the difference.

It isn’t a good idea, however, to rely on overdraft protection service as it is offered only at the bank’s discretion. For example, you might only be covered up to a certain dollar amount, a certain number of transactions, or not at all if you are considered high risk. This can happen if you make too many transactions into overdraft or if you maintain a negative balance that is too high or that is negative for too long.

There is another type of overdraft protection that rolls funds over from your savings account. This protection can be extended to both ATM card and debit card usage if you opt in. There is still a fee for the bank making this transfer on your behalf. However, the FDIC assures it is usually lower than a typical overdraft fee. Savings accounts are also limited to 6 withdrawals per month. 

If you reach your balance limit or are denied overdraft coverage for any of the reasons listed above, both an ATM card and debit card transaction will be declined.

ATM usage is where the similarities end. While both ATM cards and debit cards can be used to access your bank accounts at an ATM, only a debit card can be used to make purchases and payments.

ATM Card vs. Debit Card: Differences

Although ATM cards and debit cards can both be used at ATMs, only debit cards can be used to make purchases. That is why you will see a payment processing network logo, like MasterCard or Visa, on a debit card but not on an ATM card. ATM cards are also limited to national use while debit cards can be used internationally.

So, debit cards are much more common than ATM cards. Debit cards have a much wider range of uses. They can be used at ATMs, for point of sales (POS) transactions, and for paying bills. In 2021, over 80% of Americans aged 15 and older had a debit card.

Debit cards are electronic versions of checks. When you make a purchase with your debit card, the funds are immediately taken out of (or debited from) your checking account. So you should always keep a register of your transactions to ensure you don’t spend more than your account balance.

You can also, however, run your debit card transaction as a credit transaction. All this really does is postpones the debit. A debit transaction made using your PIN number will automatically deduct the funds from your account. Bypassing the PIN for a credit transaction, on the other hand, will take it a few days to process. It might even require a signature.

So which is better: an ATM card vs. debit card?

ATM Card vs. Debit Card: Benefits

Since ATM cards and debit cards have distinct purposes, they also have specific benefits. Here, we’ll consider the benefits of each from a few different perspectives.

Consumer

From a consumer perspective, it is risky to carry either an ATM card or a debit card. Since they are both directly linked to your bank accounts, if they are lost or stolen, then more of your funds are at risk. So, it could be safer to use an ATM card a few times a month to withdraw the cash you need temporarily and leave your card in a safe place the rest of the time.

This can also make it easier to budget, and it can prevent overdraft fees or card declines. Using cash can help make it easier to spend only what’s available without the inconvenience of physically having to document each transaction.

You can do the same with a debit card, of course. It just might be tempting to end up using your debit card for transactions as well which can cause money management issues. Withdrawal limits are also typically higher on a debit card than on an ATM card. So if something happens to your debit card, more of your funds are at risk.

However, you will need a debit card to pay certain bills. If you are enrolled for any online bill payments, you will need to provide a debit card number. 

Could you have both cards? Absolutely. Just ask your bank. And make sure you understand the fee structure because each card will have it.

Merchant

As a merchant, you can only accept debit cards, or cards associated with a network like MasterCard or Visa, as a form of payment. However, if you have an ATM machine on-site, ATM cards could bring you more surcharge income if customers have to withdraw cash to make purchases or payments. 

It can be disappointing to turn away a customer who only has an ATM card. But hopefully you can direct them to an ATM machine in your store. This is one of many reasons why it’s a good idea to have an ATM machine on-site—you experience less missed sales.

ATM Owner

As an independent ATM deployer (IAD), you reap nothing but benefits from both ATM and debit cards. When either is used on your ATM to make a withdrawal, you earn the surcharge fee. Of course, the same concept applies: if someone has a debit card, they might not need an ATM if they can simply use the card to make a purchase.

Conclusion

ATM cards and debit cards are both convenient ways to access your bank accounts at any time. You avoid being restricted to bank hours or facing long teller lines. However, if you are looking for a card you can use to make purchases or pay bills online, you are going to need a debit card. Especially if you don’t have a credit card.

ATM cards do not offer as much functionality as a debit card. Therefore, most banks will automatically issue you a debit card when you open a bank account. In the past, you might have received an ATM card initially. 

The preference is up to you. But remember that even though you and others might refer to debit cards as ATM cards, the two do have distinct purposes.

3 Tips for Determining Your ATM Surcharge Fee

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Your ATM surcharge fee is how you make money as an ATM owner. The service you provide is convenient access to bank accounts and cash. For users to take advantage of that convenience, they pay you a small surcharge fee per ATM withdrawal transaction. 

One of the most important steps involved in starting your ATM business is determining the surcharge fee you want to impose. You need to have this number at the time of completing the necessary paperwork with your ATM processor. But how do you know how much to charge before you’ve even been in business?

In this article, we’ll provide you with three tips you can use to help determine the right ATM surcharge fee.

Surcharge Fee Guidelines

Range

It will be helpful to look at a range of ATM surcharge fees to start. Typically, surcharge fees range from about $1-$8. There are even surcharge-free ATMs, but these are usually operated by store owners themselves where the extra traffic the machine brings into the store makes enough revenue to support the machine and then some.

Low End

At the ATMs you visit day to day near restaurants, convenience stores, and retailers, you’re likely to see ATM surcharge fees range from about $2-$3. This is the average surcharge fee you can expect. It’s also on the low end. 

The more ATM machines there are in an area, the lower the surcharge will be in order to be competitive. The lower surcharge also corresponds to the average withdrawal amount. Patrons of restaurants, convenience stores, and retailers typically withdraw $60-$100 ($60 being the average withdrawal amount) where a surcharge over $3 starts to become an inconvenient, illogical, and unfair percentage of the actual transaction.

High End

Therefore, ATMs in and near establishments where patrons stay longer and spend more can charge a higher surcharge fee with success. Patrons of casinos, bars, and clubs need cash where they are; it isn’t convenient for them to travel off of the premises to search for an ATM with a lower surcharge.

Additionally, the withdrawal amounts are typically higher at these locations. It makes more sense to pay $5 to withdraw $300 than it does to withdraw $60. For these reasons, surcharge fees upwards of $5 are still convenient and not seen as outrageous at these locations.

Any location with a liquor license can get away with charging higher surcharge fees. When customers drink or are having a good time, the extra cost is worth it to continue the fun, not to mention the fact that our inhibitions are lowered when we are filled with dopamine.

These are the typical surcharge fees you can expect from various locations. To set your own surcharge fee, keep reading for more factors that will affect your success.

Tip #1: Set the Surcharge Fee with the Customer in Mind

You don’t make any money if customers don’t use your ATM machine. So you want to make sure that your surcharge fee is convenient for them while still compensating for your time and effort. 

Therefore, you need to know who your customers are and what they need. This will depend heavily on the location of your ATM machine. 

If your machine is in a low-income neighborhood where account balances might be low, withdrawal amounts will also be low, and users will expect to pay less per transaction. If money is tight, it might be worth it for users to plan a trip to the bank rather than use an ATM with a high surcharge.

Alternatively, ATM users in high-income areas and higher account balances will be able to conduct higher withdrawal transactions and aren’t likely to flinch at a surcharge of $3+.

You also want to consider the price of convenience for your customers. If there are a number of other ATM machines in the vicinity, you might be forced to charge a more competitive surcharge fee. On the other hand, of course, if yours is the only ATM machine around, customers will understand paying more for the convenience of using your particular machine.

Above all, be wary of setting too high of a surcharge fee. If customers don’t want to pay it, they won’t use your machine and you will lose out on revenue. You make more money charging $2 per 10 customers than $3 per 5.

Tip#2: Discuss the Surcharge Fee with the Location Owner

If you place your ATM in someone else’s store or business, you need to consider the location owner’s needs and wants as well. The location owner knows the clientele best, so consult with him or her to determine a fair surcharge that brings in more business rather than driving it away. 

The location owner wants to bring traffic to the location, and therefore might propose a lower surcharge than you. However, if you are sharing some of the ATM revenue with the location owner, you want to make sure that your share is enough to make a profit after expenses. Collaborate with the location owner to strike a fair deal when determining the surcharge fee for your ATM.

Tip #3: Use the Surcharge Fee to Speed Up ROI

When first setting your surcharge fee with your ATM processor, you might want to err on the high end. You can’t make a profit until you meet your return on investment (ROI), and you’re going to make that amount back quicker with a higher surcharge.

Your initial investment might include the cost of the machine, additional features like a topper or security camera, and upgrades like a removable cassette or e-lock. Everything that you spent in order to get your ATM business started you need to make back first. Then, whatever you make after that earns you profit.

Remember, too, that the revenue generated by your ATM machine needs to cover regular expenses as well. This includes receipt paper, insurance if you have it, and whatever costs are associated with cleaning, maintenance, and repairs. So keep these costs in mind when setting your surcharge.

Determining Your Surcharge Fee

Pick a dollar amount. Multiply that by about 5 transactions a day. Multiply that by 30 days. That should give you a rough estimate of how much revenue to expect in a month. Now, subtract the location owner’s share and any monthly expenses associated with operating the machine.

Once you have that number, you can determine two things: 

  1. How long it will take to meet your ROI
  2. How much profit you will make

If the answer to #1 is too long for your comfort, raise the surcharge. If the answer to #2 is too small, raise the surcharge. 

In our article, How Much Can My ATM Machine Make, we provide some formulas and calculators you can use to get more accurate estimates. Play around until you get a number you are satisfied with.

Remember that you can always adjust the surcharge fee to find a good balance of convenience and revenue. You aren’t stuck with the surcharge fee you set when filling out your paperwork. Start with a higher surcharge to meet your ROI quicker, then lower it. Experiment to find out which surcharge amount brings in the most users and results in the most revenue. It’s okay to use trial and error to find a surcharge fee that works for you, the location owner, and your customers. If you’d like more guidance or want to know more about what to expect from a particular location, contact us today!