For 20 years, New Jersey has required that banks offer a $3 a month, $1 minimum balance account so the poor — who have increased in number — can have affordable banking services. Yet national banks ignore the mandate because the U.S. Office of the Comptroller of the Currency, a federal regulator, issued an opinion in the 1990s that the law doesn't apply to federally chartered banks.
Now some of the big national banks are raising monthly checking account fees to $10 or more and consumer advocates are increasingly concerned about the burden that will place on poor people who cannot get fees waived by maintaining large balances or by using online banking, because they don't have computers.
"I think (fee increases) will increase the number of unbanked people we have in New Jersey," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. "This is not the group of people that they should be looking to make money from."
She and other consumer advocates are encouraging people to switch to community banks and credit unions, which still offer free checking.
"Big banks are raising fees but small banks and credit unions are not," Salowe-Kaye said.
"I'm hoping these new fees will cause consumers to shop around," said Ed Mierzwinski, consumer program director at U.S. Public Interest Group.
Fee increases by big banks — including Bank of America, JPMorgan Chase & Co. and Citibank — were spurred by a government crackdown on overdraft penalty charges and anticipated losses of income from a cap on debit-card swipe fees that banks charge merchants. The cap goes into effect Oct. 1.
Citibank is the latest to announce an increase.
In December, it will raise its basic checking account fee to $10 a month from $8. Account holders can avoid the fee by maintaining a minimum balance of $1,500 in the checking account or a linked savings account or by making at least one direct deposit and at least one online bill payment.
The move is a response to customers' complaints about the complexity of the current fee waiver requirements, a company executive said.
"We are responding directly to feedback they've been giving us," said Steve Troutner, head of banking products for U.S. Consumer Banking for Citibank.
The New Jersey Consumer Checking Account, offered by state-chartered banks for the past 20 years, can be opened with a deposit of $50 or less, and customers can write at least eight checks a month with no extra charges. The banks can charge no more for ATM or check printing than they charge other checking customers.
But bankers say few people use the accounts because most state-chartered banks offer other accounts that are better deals, with no monthly maintenance charges and little or no minimum-balance requirements.
Englewood Cliffs, N.J.-based North Jersey Community Bank offers free checking and offers a "switch kit" to guide people through the process of moving their accounts. But so far, few have used it, said Frank Sorrentino, the bank's chief executive officer.
"Maybe $10 will be the tipping point," he said.
"I don't understand why people stay in abusive relationships, but they do," he said.