Banks have been skewered by the public, the press and politicians for nickel-and-diming consumers with fees, so it's only fair that they are given credit when they step up and do the right thing.

In New York City, five banks and five credit unions are participating in a city-run program aimed at moving unbanked households into the financial mainstream. The banks are offering what's called the NYCSafeStart Bank Account, an ATM-based transactional account that New Yorkers can open with as little as a few dollars. Best of all, participants do not get hit with any overdraft fees for at least two years.

It's hard to overstate the significance of this program, which is available to all New Yorkers but chiefly targets the city's roughly 825,000 unbanked adults. Though banks and cities all over the country are working together to offer accounts to low-income families, no other program has gone so far as New York's to limit overdraft costs. Some programs might require banks to waive the first overdraft, it's the promise of subsequent overdrafts that make these accounts worthwhile for some of the banks and credit unions that participate.

New York's consumer affairs commissioner, Jonathan Mintz, says that the overdraft component was non-negotiable. If a bank or credit union wouldn't agree not to charge the fees, then it couldn't participate in the program.

The city recently conducted a survey of unbanked adults and Mintz says it showed that unpredictable fees, above all, are what's steering low-income consumers to payday lenders and check cashers. While check cashers and payday lenders are expensive, low-income consumers often prefer them to banks because they know the costs up front.

Used properly, overdraft protection can be a great service. Consumers who are stretched a little thin one month can tap an overdraft line of credit to pay a car repair or unexpected medical costs without resorting to more costly payday lenders.

The problem with this protection has always been that too few people know they have it and are therefore surprised when they are hit with a $39 fee on a $4 fruit smoothie. Bankers often say that consumers are grateful to banks for letting transactions go through and sparing them embarrassment at the checkout counters, but the truth is most would rather have the transactions declined. It's why Congress stepped in and passed a law prohibiting banks and credit unions from covering overdrafts unless the customer says it's O.K.

The five banks participating in the New York program are M&T Bank, Capital One, Amalgamated Bank, Carver Federal Savings Bank and Checkspring Bank. What's in it for them? Not much, at first, but their hope is that some accountholders will get comfortable enough with banks that they'll become better savers and maybe, down the road, borrowers and even investors.

"When we bring someone into the mainstream banking system, we're setting them on the path to greater financial health and independence, and we're also helping create a new long-term banking customer," says Steven Flax, M&T's vice president for community reinvestment.

Bravo to these banks for recognizing that overdraft fees are a deterrent to winning over the unbanked. Here's hoping others follow their lead.

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