How ATMs Work? You're short on cash, so you walk over to the automated teller machine (ATM), insert your card into the card reader, respond to the prompts on the screen, and within a minute you walk away with your money and a receipt. Have you ever wondered about the process that makes your bank funds available to you at an ATM on the other side of the country? ATM Card vs. Check Card As an alternative to writing checks and using a credit card, most major banks have teamed up with major credit-card companies to issue check cards. Check cards are different from straight ATM cards in a couple of ways. First,check cards are also known as debit cards because of how they work—instead of getting credit for your purchase and receiving a monthly bill,like you do with a credit card, a check/debit card deducts money from your checking or savings account. Also, while you can only use your ATM card at the ATM machine (and some grocery stores), you can use a check card at most retailers that accept credit cards. There are exceptions. Some hotels and rental car services only accept credit cards because it's easier, cheaper, and less of a risk to them than check cards. Those that do accept check cards often put a certain amount of money in your bank account 'on hold' (unavailable to you) usually the cost of the room or rental including taxes and other fees, plus a percentage of the total or a fee to cover possible damages. When you check out of the hotel or turn in your rental car, the difference between the'hold'amount and what you're actually billed is released back into your account. This is something to consider when using your debit card to reserve a hotel room or rent a car. The Way ATMs Work An ATM is simply a data terminal with two input and four output devices. Like any other data terminal, the ATM has to connect to, and. communicate through, a host processor. The host processor is analogous to an Internet service provider (ISP) in that it is the gateway through which all the various ATM networks become available to the cardholder (the person wanting the cash). Most host processors can support either leased-line or dialup machines. Leased-line machines connect directly to the host processor through a four-wire, point-to-point, dedicated telephone line. Dialup ATMs connect to the host processor through a normal phone line using a modem and a toll-free number, or through an Internet service provider using a local access number dialed by modem. Leased-line ATMs are preferred for very high-volume locations because of their thru-put capability, and dial-up ATMa are preferred for retail merchant locations where cost is a greater factor than thru-put. The initial cost for a dial-up machine is less than half that for a leased-line machine. The monthly operating costs for dial-up are only a fraction of the costs for leased-line. The host processor may be owned by a bank or financial institution, or it may be owned by an independent service provider. Bank-owned processors normally support only bank-owned machines, whereas the independent processors support merchant-owned machines. Sensing Bills The cash-dispensing mechanism has an electric eye that counts each bill as it exits the dispenser. The bill count and all of the information pertaining to a particular transaction is recorded in a journal. The journal information is printed out periodically and a hard copy is maintained by the machine owner for two years. Whenever a cardholder has a dispute about a transaction, be or she can ask for a journal printout showing the transaction, and then contact the host processor. If no one is available to provide the journal printout, the cardholder needs to notify the bank or institution that issued the card and fill out a form. that will be faxed to the host processor. It is the host