Cash machine fraud increased by 85% to £61m during the past year, according to the Association of Payment Clearing Services (Apacs).
UK card fraud is on the increase
Cash machine crime was the fastest growing form of card fraud in the past year, the banking payment body added.
Fraudsters target cash machines using skimming devices, which copy card details, and miniature camera devices, which record cardholders' PINs.
However, Apacs added that the majority of cash machine withdrawals are safe.
Recently, Apacs revealed that total card fraud rose by 18% to £478.8m in the year to June 2004.
The £28.1 m increase in fraudulent cash machine withdrawals accounts for a major portion of the overall rise in fraud.
Fraudsters place a skimming device over the cash card insert, while a secret miniature camera above the keypad records the PIN number.
If there is no camera in place, a fraudster may lurk near the cash machine spying on users in a bid to capture their PIN numbers.
Skimming is a process whereby the data from a card's magnetic strip is electronically copied onto another card.
The replica card is then used to purchase goods or withdraw cash, often on the other side of the world.
One victim, Hilary Murdoch from London, said she was unaware she had been targeted.
"My bank phoned me up and informed me there had been a couple of very large transactions on my debit card that weren't me," she said.
"Following that they stopped my card and are now investigating that fraud.
"It was £900 and if they hadn't stopped it when they did there would have been another £1000 after that as well," she added.
In total, cardholders withdraw £144bn from cash machines in the UK each year.
"Cash machines are our most commonly used and most convenient way to access our money, with 75 cash withdrawals made every second," Sandra Quinn, Apacs spokeswoman, said.
"Remember, it is much safer to carry a card around than keep a lot of cash in your wallet and if you are a victim of card fraud you will not suffer any financial losses as long as you haven't acted negligently."
Ms Quinn added that criminals were stepping-up their fraudulent activities during the introduction of chip and pin card technology.
Chip and pin cards aim to cut fraud by including a smart chip, which can store more information than the usual magnetic strips, and also by having users verify transactions by keying in a pin number rather than signing a receipt.
France pioneered the technology more than 10 years ago - reportedly cutting fraud by almost 80% as a result.
Latest figures from the Chip and Pin programme show more than 50 million new cards have been sent out to around 25 million of the UK's 42 million card holders.
Apacs is advising cardholders to check their account regularly in order to spot bogus transactions.