Is it safe to deposit checks through an ATM?

To deposit checks in a traditional ATM, a customer writes his or her information, including the total amount of the deposit, on the outside of an envelope and places the check(s) inside. The machine will prompt the customer to key in the amount of the deposit. The customer can then feed the envelope into the machine, where it sits until a bank employee comes around to service it. After that, a bank employee will verify the keyed-in information and process the check as usual.

The problem with this method is two-fold. Banks have claimed it leads to fraud, as customers can key in a higher amount than they are depositing. To prevent this, many banks don't make such funds available until a human verifies the deposit. But customers have also complained of banks losing checks deposited via ATM. (Or, there's always the small possibility that the ATM itself will get robbed.) This is why experts especially advise against depositing cash through an ATM [source: Quinn]. When receiving complaints of lost cash, banks may simply tell customers it is impossible to verify the amount in the envelope. Whereas a misplaced check can likely be canceled and reissued, cash cannot.

To the relief of both banks and many customers, advanced ATMs are emerging that digitally scan individual checks to determine the amount on the spot. Although the machines vary depending on the particular bank, the customer typically can approve the digitally determined amount, ask for a check back or even print out the digital images on the receipt. These ATMs are also able to immediately send the images of the checks to the bank, thereby saving the banks money by reducing the costs of frequently servicing machines and processing checks.

But this method isn't perfect either. A common complaint is that these machines reject some checks as unreadable, requiring the customer to go to a teller, which wouldn't happen with the traditional envelope method [source: Anthony]. Many customers have also complained that depositing multiple checks with these new-fangled machines is more laborious and time-consuming than the traditional envelope method.

Even given all these possible problems, you still may feel the lure of the quick-and-easy ATM deposit. After all, banks don't usually lose checks, and yours might offer the more advanced machines that seem to be less prone to such mistakes. Or, your work schedule might prevent you from even having the option to go to a bank during the day. The good news is that, if you still insist on depositing checks through an ATM, there are a few tips to follow that can at least minimize the potential of a problem.

So you're making a deposit at the ATM. To minimize your risk of a potential problem with the transaction, follow these tips:

Of course, there are alternatives that we haven't yet discussed. Probably the most important of these is you should talk to your employer about the possibility of direct deposit. This will ensure that your regular paycheck automatically gets deposited into your bank account. You'll receive the paycheck stub for your records and you'll save yourself the hassle of having to visit the bank or the ATM to make a deposit.

And, as convenient as ATMs are, an even easier technology might soon become prevalent. The bank USAA now allows customers to deposit checks via iPhone. With their application, it's as easy as taking a picture of both sides of the check and sending it to the bank [source: Stellin].

But, of course, this service is only available to qualifying USAA bank customers who have ready access to an iPhone. Until such services become more common, you'll have to ask yourself whether the convenience of ATM deposits is worth the risk.