What is the point of ATM transaction limits?

Question

One time, I needed $300 from an ATM, but this particular ATM had a $200/transaction limit. I took $200 dollars out of my checking account and took my card. Literally a few seconds later, I put my card back in and took the other $100 out with no issues. What is the point of transaction amount limits if they can be circumvented by simply doing multiple transactions?

Answer 1

It's rather common for an ATM to only be stocked with $20s and lower (or even with nothing but $20s). That means your $200 transaction limit might actually be a more customer-friendly way of saying the machine has a limit of 10 bills per transaction.

The ATMs that I've used in recent memory all used the same type of bill dispenser mechanism. A little panel opened and bills were fed halfway out, propelled by rollers above and below. Those rollers also held the bills in place until you took them. That style of mechanism will naturally have a limit as to how far the rollers can spread apart and thus how thick a stack of bills they can dispense. Going over that limit means the bill feeder could jam, disabling the machine or shredding your cash. Also, the rollers are made of high-friction rubber but a well-used bill can be rather slick. If the stack gets too high and the rollers can't squeeze hard enough to keep the bills in the center of the stack in place, then some of your bills could fall out of the machine or blow away in the wind.

I have a feeling this is one reason for the limit because you'll get a similar limit when you try to deposit something at an ATM. Deposits are fed into the machine by a feeder that looks just like the output feeder. Some units even use a single slot that does double duty. When you tell the machine you want to make a deposit, it will typically say that you can deposit multiple items at once but you can only deposit X number at a time. I made a deposit the other day and do you want to guess what it told me? "Deposit up to 10 checks or bills at a time".

Answer 2

Likely only your bank can answer this for sure, but I think we can make an educated guess as to some reasons for this. All of these ideas assume that it's in the bank's best interest to limit the amount of cash withdrawn from their ATMs, while still maximizing the value of having an ATM in the first place:

1. Fees: maybe you aren't paying any fees in this case, but some people might be, and this would be one way to extract addition profits from the ATM (per dollar withdrawn).
2. Some people don't know your trick. Even those that do may simply not go through the extra effort to perform an additional transaction.
3. In the (hopefully) rare event that someone is being forced to withdraw cash against their will, or their card is stolen, the lower limit may help to protect the victim in the case that the perpetrator doesn't know your trick, or doesn't wish to take the extra time to use it.
4. Certain account types have a transaction limit per month. For example, a savings accounts may be limited to 6 withdrawals per month. Apparently "Regulation D" is no longer in effect, at least federally, and furthermore it may not have applied to ATM or teller withdrawals anyway.

I also want to draw special attention to user11153's answer which expands upon a very likely motivation being additional Fees, with the subtle distinction that the ATM owner profits per transaction from the banks themselves. Also see jaskij's comment below where one company admitted this exact reasoning.

Answer 3

i used to work for an institution that did this. it was because the per-transaction limit and the per-day limit were controlled in separate systems. they could raise the per-day limit on the card easily on the central server, but could not raise the per-transaction limit on all the atm's for technical reasons because it was stored in a decentralized way. so they raised the per-day limit, but left the per-transaction limit in place.

Answer 4

I think it's to prevent a situation where someone accidentally withdraws thousands of dollars accidentally.

For example, some people may throw a few extra 0s on the end either confused about if they need to include cents, or simply not paying attention.

Obviously it's suboptimal for people to be carrying around thousands of dollars accidentally.

Answer 5

It's common thing in ATMs that are not operated directly by your bank, but by some independent network. That's because your bank has to pay fee to owner of ATM for each transaction. So for the owner it's more profitable to serve more transactions using the same number of bills.

Answer 6

While I like bta's answer best (and I think it's the main reason), here's one more aspect that hasn't been considered: fraud protection.

Suppose you get a large amount of illegal money in your account. Say, a forged check. You know that it will be discovered soon so you want to withdraw it in cash and disappear. Having a limit in place makes sure you can't empty the whole ATM at once. In fact it will be a very slow and tedious process to withdraw large sums of money (tens of thousands). This makes it both impractical and also gives the bank time to react.

Answer 7

While I don't think I'm going to add anything other answers haven’t already covered, I wanted to frame it slightly differently. This is based on speculation as much of the other answers are and I have no experience in the field of ATMs.

ATMs are stocked with a finite amount of cash, and need to be restocked regularly. How much cash they hold is a balance between not having to restock too frequently and not making it too much of a target for criminals.

Restocking requires a secure van and a couple of people driving about so naturally costs money. They don't want someone to empty it in a single transaction so a limit has to be set somewhere but they also need to cover the costs of restocking each time. A transaction fee charged to the bank and value limit allow for predictable minimum revenue between restocks.