Do You Need An ATM Buffer Account?

My father’s ATM card number was stolen a few years ago and the thieves cleaned out $4,000 (the entire amount he had in that particular account) before he even knew what happened.  Yes, he did eventually get reimbursed, but it was a stressful experience.  That’s why Might Investor suggests you consider creating an ATM buffer account that walls off your ATM funds from the rest of your financial life. 

What’s An ATM Buffer Account?  

Simply put, the buffer account is a separate checking account in which you keep very little money and that you use exclusively to withdraw the cash that you need in your life.

Especially when traveling in areas where ATM scams — such as skimming — are common (I’m writing this post in Kyiv, Ukraine, right now), using an ATM card that is not linked to the bulk of your emergency funds or other parts of your wealth helps protect you in case your ATM card information gets stolen.  Yes, you should be able to get reimbursed for debit card fraud if you act very quickly after an account number is stolen, but the protections for consumers when an ATM card number is stolen are weaker than when a credit card number is stolen.  Also, in contrast to when your credit card number gets stolen, it can take a while to get reimbursed for debit card fraud. 

So Mighty Investor suggests you use a credit card as much as possible (assuming you have the discipline to never slip into credit card debt) and also use an ATM buffer as described in this post. 

Here’s How The ATM Buffer Account Works

• You open an account with a financial institution that you will use specifically for ATM withdrawals.  You keep no other assets at this institution.
• You link this account online to a bank account at a separate institution that has the bulk of your cash.  (Obviously, only you can log in to either account online.)
• You transfer the minimal amount that you need to withdraw as actual cash into your ATM buffer account a few days before you will need the cash (since ACH transfers can take a few days to clear).
• You withdraw the cash you need from your buffer account as needed and replenish it by transferring over new funds from your main banking account when you need more funds.

A Charles Schwab Checking Account Isn’t A Bad Option

If you don’t use Charles Schwab for your investing, I suggest you consider opening a Schwab Bank High Yield Investor Checking as your buffer account.  Why?  Because Schwab waives all ATM fees worldwide, and because you can lock in a nice sign-on bonus by making an initial deposit (you don’t have to keep all the funds in the account after you secure the bonus).  Here’s the link.  

Also, Schwab offers 24/7 customer service and is a generally well-run company.  Keep in mind, however, that you should keep the minimum amount necessary in this account–both to follow the strategy described in this post, but also because Schwab pays very little interest on its checking accounts.  (Mighty Investor does not receive compensation if you click the link above and sign up for an account with Schwab.)

And that’s it.  Creating and maintaining an ATM buffer account is a little bit of extra effort, but you are going a long way towards protecting yourself in case your ATM card information gets hacked.  Cheers!