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What is a reverse ATM?

These machines are becoming more common as businesses increasingly go cashless.

Yahoo Personal Finance· Getty Images
4 min read

ATMs are just about everywhere, but reverse ATMs tend to be less common — at least for now.

Due to the security, convenience, and relative sanitation of card payments, cash payments have been declining over recent years. For a variety of reasons, more and more businesses are choosing to only accept card payments.

But these limits on cash payments present a problem for those without access to a debit card or credit card. Reverse ATMs, which accept cash deposits and dispense a prepaid card in exchange, are one solution. However, they’re not without drawbacks.

Continue reading to learn more about how reverse ATMs work and the potential costs associated with them.

A reverse ATM, or a cash-to-card kiosk, is a freestanding kiosk that accepts cash deposits and dispenses a prepaid card in return. It looks similar to a regular ATM but performs essentially the opposite function.

The card you receive from a reverse ATM is like any prepaid card and comes with standard security features. You can generally use it anywhere debit or credit cards are accepted. Some reverse ATMs also offer the ability to reload a card rather than receive a new one. If you use reverse ATMs regularly, this can help you avoid racking up a collection of cards.

Reverse ATMs have been popping up in businesses that want to avoid cash payments entirely. Popular locations include sports stadiums, theme parks, festivals, airports, and restaurants.

Read more: Guide to ATM safety: Tips for protecting yourself and your money

Reverse ATM fees vary depending on the machine. Some machines don’t charge customers at all. Others may charge certain fees, such as a fee to get a new card or transaction fees. Some cards may also come with dormancy fees, which charge you for not using the card within a certain period of time.

Merchants have to pay fees associated with the cards the machine dispenses. Visa and Mastercard charge interchange fees, which are standard with any card transactions and paid by the merchant, not the customer.

Since fees vary by machine, it’s worth finding out what — if any — charges you’ll have to pay before using a reverse ATM.

Read more: How to avoid ATM fees

Reverse ATMs can be a convenient solution for both businesses and customers, but there are drawbacks, too. Consider the following pros and cons of reverse ATMs.

  • Reverse ATMs benefit businesses and customers. These machines, when located in businesses that don’t accept cash payments, allow underbanked individuals to make purchases. Meanwhile, businesses can make payment accessible to all without having to worry about the hassle of cash.

  • Cards are more convenient than cash. It’s easier and often quicker to carry a card and pay electronically than dealing with paper currency. Plus, businesses don’t have to worry about storing cash when they’re dealing exclusively with card payments.

  • Cards are more secure than cash. Stolen cards are easier to report than stolen cash, making them more secure for customers. Plus, business owners and employees can feel safer knowing they’re not storing high volumes of cash on the premises.

  • Cards support contactless payment. The pandemic brought to light just how unsanitary paper money can be. Reverse ATMs and card payments allow both businesses and customers to limit the spread of germs.

  • Reverse ATMs may be hard to come by. Though reverse ATMs are popping up in a variety of businesses, they’re not as widespread as traditional ATMs. Depending on where you live and the businesses you frequent, you may not come across reverse ATMs very often.

  • Businesses may not want to pay for reverse ATMs. Businesses have to front the cost of a reverse ATM, which may be prohibitive for some.

  • Customers may have to pay fees. As with traditional ATMs, reverse ATMs may charge fees. This extra cost is something customers have to look out for if and when they decide to use these machines.

A reverse ATM allows customers who may not have access to a debit or credit card to make purchases at businesses that don’t accept cash payments. For example, if you only have cash in your wallet but visit a card-only restaurant, you can use a reverse ATM to buy a prepaid card, which you can then use to pay for your meal. Reverse ATMs can also be convenient in instances where you don’t want to carry around cash and would prefer to convert it to a prepaid card.

ATMs are disappearing as customers rely less on cash and more on cards and digital payment methods. In 2019, consumers with bank accounts used cash about 25% of the time. In 2022, that percentage dropped to 17%. In addition to the convenience and security of card payments, the global pandemic highlighted sanitation concerns around handling cash.

A cash-to-card kiosk is another term for a reverse ATM. It’s a self-service terminal that accepts cash and dispenses a prepaid card for the same amount. It’s a solution for businesses that want to eliminate cash payments without prohibiting unbanked customers from making purchases.