Read your lease first. The lease should state clearly where the landlord will hold your security deposit. It must be deposited in a "Landlord Tenant" account.

The NJ Rent Security Deposit Act applies to all rental units, including tenant-occupied, single-family homes. The only exception is for rental units in owner-occupied buildings that have no more than two units other than the owner-landlord's unit. 

The law applies as well to to tenants of owner-occupied buildings if the tenant sends a 30-day written notice to the landlord stating that he or she wants the landlord to comply with the law's provisions.

The most a landlord can collect as a security deposit is one and one-half times the monthly rent. A landlord may request an increase in your security deposit if the rent is raised. This is limited to 10% of the current deposit amount.

EXAMPLE: If the monthly rent is: $1,000, the landlord may ask for a $1,500 security deposit.

Under the Rent Security Deposit Act  the landlord has to put your security deposit in a separate bank account that pays interest. The landlord must tell you in writing the name and address of the bank where the deposit is being kept, the amount of the deposit, the type of account, and the current interest rate for that account. NOTE: The Landlord may put this directly in the lease.

The security deposit law says that this notice has to be given to the tenant in writing within 30 days after the tenant gives the deposit to the landlord.  The law says that the landlord must also give the notice not just within 30 days of getting it from the tenant, but each year at the time the landlord pays the interest to the tenant.
 A new landlord must also give the notice within 30 days of buying the property. The notice must be given to the tenant within 30 days after the landlord has moved the deposit from one bank to another, or from one bank account to another (unless the change in the bank or account takes place less than two months before the annual interest payment)

Your  security deposit as rent : The law also says that if the landlord does not put the security money in a proper bank account, or does not give a proper written notice to the tenant every time the law provides for, then the tenant can give a written notice to the landlord telling the landlord to use the whole deposit interest per year  to pay the tenant's rent.
  
All notices should be sent to the landlord by certified mail, return receipt requested, and you should keep a copy. 
The money can be used to pay future rent or any back rent the tenant owes. Once a tenant legally tells the landlord to use the security deposit as rent, the landlord can't ask the tenant for another deposit as long as the tenant lives in the apartment or house. 

Note: There are two exceptions to the rights described in the paragraph above.

• If a landlord does not obey the law that says he or she must pay the interest on the security deposit every year (or if the landlord does not use the interest to pay part of the tenant’s rent), or
• If the landlord does not give a notice about the deposit to the tenant every year, then

the tenant can use the deposit to pay past or future rent due. 
But before the tenant can do this, the tenant must give or send the landlord a letter giving the landlord 30 days to pay the interest or give the annual notice. 

There are two other important points about the notice of security deposit:

• Landlords will often put the name and address of the bank where your security is deposited, along with the other information required by law, right in the lease. This is sufficient notice under the law.
• Even if the landlord sends you the notice within 30 days, the landlord still violates the law if the notice is not true. If you receive the notice, call the bank to find out if the money has been deposited. If the money was not deposited, you can tell the landlord in writing to use the security deposit to pay your rent just the same as if the landlord had not sent you a notice at all. 

Interest on your New Jersey Security deposit
The Rent Security Deposit Act requires landlords who rent 10 or more apartments to place tenants' security deposits in either an insured money market fund or a federally insured bank account. The account must pay a rate of interest set at least quarterly and equal to the average rate of interest paid by the bank on money market accounts. 

Read more on Security Deposit Interest Rates in New Jersey

These higher interest accounts must be in New Jersey-based institutions.

The law requires landlords who rent fewer than 10 apartments to place security deposits in bank accounts that pay at least the regular rate of interest. 

The law no longer allows the landlord to keep any amount to cover his or her administrative expenses.

The law now requires that the interest earned on the deposit must either be paid to you in cash every year or subtracted from the amount of rent you owe on the renewal or the anniversary of the lease. This must be done either when your lease is to be renewed, or on January 31 each year. (But the landlord must give you a written notice that he or she will be paying you on January 31 of each year instead of the date your lease is renewed.) 

See Also: Getting Back Your New Jersey Security Deposit