Let’s Look at the Issues

A recent study by the Federal Deposit Insurance Corporation (FDIC) contains some alarming news about working families and bank accounts. Among other results, the study revealed that almost one-third of all households in the U.S. do not have a savings account, 10 percent of all U.S. households do not have a checking account and more than 10 million American households have no bank account(s) at all. People who participated in a similar study said that the major reason for this unfortunate situation is the high fees that banks can charge account holders. But the truth is that fees can run even higher if you don’t have a bank account. Just look at the fees charged by any check cashing store, and you’ll understand what we mean by high fees. And while we realize that the situation described here doesn’t apply to many of you who are reading this column, we do hope you will pass along the information it contains to any household you may know that does not have a bank account. It’s important because bank accounts can help establish credit and are actually required in most cases to obtain a credit card.

It is equally important for everyone to know that high fees should not stop any resident of New York State from having a bank account. We say that because banks doing business in New York are required by law to offer low fee checking accounts to residents of the state.

New York State law created “Basic Banking” accounts in 1995. The purpose of the law was to provide access to banks to New Yorkers who might otherwise be unable to afford a checking account and to those consumers who do not make many banking transactions each month.

Basic banking accounts are required to be offered by any bank (or other financial institution) in New York State whose deposits are insured by the FDIC. Basic banking accounts are not free and may be more limited in their terms of service than regular full-service checking accounts, but they are affordable because their fees cannot exceed three dollars ($3) per month.

Banking institutions are permitted to impose certain conditions on opening and maintaining basic banking accounts, but none of them are restrictive. In fact, anyone who is a resident of New York can have a basic banking account in the state if they meet the following easy requirements.

• Account holders must provide the same information as other individuals that maintain regular consumer transaction accounts at that institution.
• Recurring payments to the account holder, such as monthly social security checks, weekly paychecks, monthly pension checks, etc., must be made to the account by direct deposit if it is available.
• You may not maintain another transaction account at any other bank.

Basic banking accounts have several attractive features. They include the following:

• The initial deposit amount required by the banking institution to open the account can be as low as $25.
• The minimum balance required by the banking institution to maintain the account may not be more than $.01 (one cent).The monthly charge by the banking institution for maintenance of the account may not be more than $3.00.
• The minimum number of withdrawal transactions which may be made during any billing cycle at no charge to you is eight. In other words, a banking institution in New York must allow at least eight withdrawals a month free of charge if you have a basic account. We are happy to add that some banks in New York offer more than eight free transactions a month with basic bank accounts.
• There are no restrictions on the number of deposits that may be made to a basic bank account without incurring additional charges, unless the deposits are made through ATMs (automated teller machines) that are not operated by the banking institution where you maintain your basic banking account.

There are just a few other things you should know about basic bank accounts. For one, the banking institution is required by law to furnish you with a description of the features of the account before you open a basic banking account. Also, when opening a basic banking account you should be sure to read through and understand fully all the materials you receive from the banking institution before you sign any agreement. If you have questions, sit down with someone at the banking institution and be sure to have your questions answered to your satisfaction.

Remember: New York law requires banks doing business in our state to offer low fee accounts! This means that no one should be without a bank account that can help establish credit and serve as a safe place to have your paychecks directly deposited.