How the Psychology of ATM Fees Can Save You Money

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ATM Fees and the psychology of spending

Have you ever walked a mile just to avoid a foreign ATM fee?

It turns out that many of us do – and it’s perplexing the RBA.

Since the banks started displaying the $2 foreign ATM fee when you withdraw money, use of foreign ATMs has reduced markedly.

What has the RBA perplexed is that the fees haven’t actually increased – in fact, they haven’t changed at all.

We just know about them now. And that knowledge is affecting our behaviour.


If it’s not costing any more, why are we now choosing to avoid using foreign ATMs?

The RBA has come to two conclusions:

  1. Prompting at point-of-sale (‘would you like to continue with your transaction?’) can influence a customer’s behaviour; and
  2. People are now aware of the fees whereas previously they were not. Before, foreign ATM fees would appear on bank statements long after a transaction had been completed; now the fees are displayed on the ATM screen prior to a transaction being completed.

Saving on bank fees is great (although there are probably better ways to stick it to the banks than walking 4 blocks in the rain to save $2), but the psychology behind the RBA report can be applied to other areas of spending and can help save even more money.


We all know that prompting at point-of-sale can encourage us to spend more money. “Would you like fries with that?” is a good example.

The findings of the RBA show that prompting at point-of-sale can also encourage us to avoid spending. There are two things at work here: the reminder itself (‘do you really want to continue with the transaction and pay the $2?’) and the break in the flow of the transaction that snaps us out of our buying mode and gives us time to question our purchase decision.

So how do we use this information?

To avoid impulse buys, we need a way of prompting ourselves to question whether we really want to continue with a transaction or spend our money. A reminder that snaps us out of the excitement of the purchase.

Marketers know that we buy with our emotions and use reason to justify our purchases after the fact. We need a way to override that emotional response and use reason to evaluate purchases on the spot.

It’s not easy.

Even the most frugal of shoppers can get carried away with the thrill of the purchase.

The good news is that we can use strong, positive emotions in our favour to override the emotional response of purchasing new things.

Here’s how.

Maybe you’re saving for a holiday that you’re really looking forward to. Maybe you’re trying to get out of debt. Stick a picture on your credit card of something that represents your holiday or what freedom from debt means to you. This serves as a strong, personal, and meaningful emotional prompt at point of sale that encourages you to question your purchase.

The science says prompting at point-of-sale is effective for changing behaviour. Reverse the tactics and make them work in your favour.


Behavioural economists talk about the ‘pain of paying’.

This refers to the emotional discomfort we feel when buying something. Some purchases induce more pain than others – fees produce way more pain when handing over money than a treat does.

We can use the pain of paying to our advantage by adding in a little pain (or increasing it) when we spend. And we do this by paying with cash.

The tangibility of cash makes spending it more real whereas using eftpos, credit doesn’t feel like spending at all. No pain purchasing with credit (at least, not until the statement arrives); pain paying with cash.

Therefore, paying with cash becomes another barrier to spending money impulsively or on things that don’t really matter.


Prior to foreign fees being introduced when you make a cash withdrawal, people didn’t actively try to avoid the fees because they weren’t aware of them when it mattered.

The same can be often said of our personal finances. Many of us don’t have complete information when it comes to spending.

Are you spending less than you earn? Can you afford to pay off your debts? How long will it take? How much interest is that purchase going to cost you? Can you spend and then still afford to pay the bills or put petrol in the car? How much are your little splurges adding up? Are the little expenses stopping you from affording the really important stuff?

How do you know?

The only way to know is to have some kind of plan for your money.

You can certainly use a traditional budget to manage your money, or you can take the easier, more proactive and efficiently approach and create a game plan for your money that helps you to make spending decisions in advance.

Either way, it’s important to see how individual purchases fit within the larger picture of your personal finances.

While it might seem like a dry subject, we can use the information gleaned from behavioural economics to save money on more than just ATM fees.

how the psychology of ATM fees can stop impulse buying

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  1. I changed banks and was so surprised at how much i was spending in fees before without even realising. ING who im with now refund all ATM and efptos/pay wave fees. In 6months they had refunded $100 worth of fees!

    1. Melissa Goodwin says:

      Wow! That’s a lot. Thank you for the tip.

  2. I am quite ambiguous on credit cards. It is convenient when travelling but like any other things, it requires moderation and discipline when using.

  3. Jay Dann Walker says:

    With all financial matters, knowledge is powerful ammunition…

    Melissa, your ATM article is so masterfully written, you have analysed the matter of ATM logically and intelligently and you have presented it so well. Kudos to you for this, and please give us more of the same!!

    The reader’s comment re ATM fees being refunded by a bank, is information worth heaps to anyone reading this. I have written myself a note to look into this carefully in the next few days. Many thanks, Jacinta!!

    As we all know, banks are now pushing us hard to use plastic for all our purchases. Convenient, yes. But it also provides a LOT of free marketing data which some banks are surely not shy of selling on to marketing agencies. I know of two ‘biggies’ (I won’t name them, but it’s easy enough to find if you do a Google search) that do this – and a fair number of the small ones, also credit unions, are flogging off our data as well. All without our authorisation.

    I can only suggest that everyone who reads this article, should examine their bank statements carefully, and see if there are any discrepancies. Recently I discovered that my credit union (BankVic in Melbourne) had been sneaking various fees into two of my accounts. I immediately sent off a polite, carefully worded email of complaint to the CEO of my bank – and got a pleasant surprise when a rather nice amount (enough for a good dinner for the two of us at one of the better cafes) was promptly refunded to me.

    Keep up the good work, Melissa, please. You are a legend!!

    From your long-time (if not always regular) reader,
    DANN in Melbourne

    1. Hi, Dann, nice to hear from you. Data is certainly the new currency. Shame WE can’t charge for use of OUR data that they are making a motza from.