6 ways to NEVER pay an ATM fee again

by Farnoosh Torabi for CBS MoneyWatch.com

It's midnight and you're about to close the bill at the local Italian eatery when you're suddenly reminded: It's cash only. Slightly embarrassed (and very annoyed), you desperately rush outside, squinting in the dark to find those three letters that should hopefully relieve you from dishwashing duty back at the restaurant.

You see it in neon light: A-T-M.

Ah, but this transaction will cost you - probably around $3.50, including your bank's non-network ATM fee and the ATM's own surcharge. While you shrug it off because you're in a bind, let's be honest: This isn't the first time that week you've paid up for withdrawing money. A closer look and you see you've spent close to $10 on ATM fees over the last 7 days. In a year, that's more than $500. The pain sets in.

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In the interest of keeping more money in your checking account (since banks are finding more ways to charge us in the wake of Congress' Credit CARD Act), here are five ways to avoid those pesky ATM fees.

1. Open a Checking Account at Your Brokerage House

The Fidelity mySmart Cash Account and Schwab High Yield Investor Checking rebate all ATM withdrawal fees to customers' accounts, so long as you also have a separate brokerage account.

2. Bank Online

Ally Bank's online checking account customers pay no ATM fees whatsoever. And at HSBC Direct, the virtual bank reimburses customers for up to three times out-of-network ATM fees per month. Other online banks also offer fee reimbursements, though you may need to have a minimum account balance to qualify. For example, high-interest checking account customers at EverBank receive unlimited ATM fee reimbursements, so long as the average daily balance on your account exceeds $5,000. Same goes with eTrade Max Rate checking-account customers.

3. Opt For Cash Back

There are several stores that offer a free cash-back service any time you pay with your ATM card - among them Staples, Rite-Aid, Walgreens, Whole Foods and Best Buy. So you might want to pop in and pick up a some blank CDs or packs of gum. But take note: There's usually a limit to how much you can withdraw, sometimes $20 to $60.

4. Use Apps to Find Surcharge-Free ATMs

Your bank may still charge you for using an out-of-network ATM, but you can at least pocket a dollar or two by downloading a free phone application that'll help locate a surcharge-free ATM nearest you. The Mobile Allpoint App, available for iPhone, Blackberry and Android users, hooks you up with some 37,000 surcharge-free ATMS across the country. If you're a member of a credit union that it is part of the CO-OP network, you may want to check out this ATM Locator application. It's available for the iPhone, iPod Touch or iPad.

5. Use Your Bank's ATM

A 2009 survey by ING Direct found that one in five ATM users pay a fee at least once a month for using an out-of-network machine. Of those ATM users, more than half paid an average of $2 per withdrawal. One way to avoid this is to identify where your bank's ATMs are located. This used to be easier said than done, but now many banks offer free mobile applications to help you locate an affiliated ATM in your neighborhood. Or, at the least, you can search on your bank's Web site, jot down the nearest ATMs and plug them into your phone as a reminder.

6. Take Out Enough Cash for the Week

The less often you need to visit the ATM, the less you'll face the burden of trying to find an fee-free ATM. Plan your week's cash spending as well as you can, and withdraw that much at the beginning of the week. And remember: Cash is king. If you're ever in a small shop or local store, ask the clerk if you can snag a 10% discount for using cash, since merchants hate paying those credit card swipe fees.

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