A Fortune in ATM Fees

We’ve all been there before, you’re next in line and go to pay for your item but the store doesn’t take cash.  Conveniently, there is an ATM nearby and you go to take money out; however, before you can get your cash the ATM prompts you to accept a $2.00 fee for using their machine.  Most of the time people just grumble and hit yes, but if you really think about it, you just paid 10% to take your own money out of some other banks ATM.

The bad news is that you just got robbed, the good news is that you can be in the same exact situation and get reimbursed for the fee if your with the right bank.  One of the reasons that I have a checking account at Charles Schwab, in addition to my primary checking account at Chase, is because Schwab will reimburse you for an unlimited amount of third party ATM fees.  Chase doesn’t offer this feature so I make sure to use my Schwab debit card anytime there isn’t a Chase branch nearby. 

On the last day of the month, Schwab will credit your account for 100% of any ATM fees you paid during the month in addition to any interest accrued during the month on the balances you keep.  Many other banks offer ATM fee reimbursements but I’m not sure of any banks that offer this benefit on an unlimited basis unless you already keep large balances with the bank or you are private client status.  In any event, the next time you find yourself in this situation just make sure your bank offers to reimburse third party ATM fees so you don’t have to pay someone else to use your own money.

Always remember that time is money and we must always think of every dollar we have in terms of its future value.

FV = PV(1 + r)^n

Whereas:

PV = Present Value

r = rate

n = number of periods

$2.00 grown at 8% over different periods can lead to fascinating amounts.

$2.00(1 + .08)^20 = $9.32

$2.00(1 + .08)^40 = $43.44

$2.00(1 + .08)^100 = $4,399

$2.00(1 + .08)^200 = $9,677,899

Back in year 1626, the Indians sold the island of Manhattan for $24.00.  If they would have invested this amount at 8% the Indians would have a sizable fortune that is nothing to laugh at.

$24(1 + .08)^386 = $1.913 x 10^14 or $191.3 trillion dollars, enough to pay off the national debt more than ten times over.

No wonder Einstein once declared that compounding is the most power force in the universe.