Many large banks are doing away with FREE checking and replacing it with FEE checking. John Ulzheimer of Credit.com examines this trend and explains why it’s happening and what you can do about it.

Why is this happening?

The CARD Act is going to cost credit card issuers tens of billions of dollars in lost over limit fees -- in addition to the unknown costs to comply with other provisions of the Act. The issuers are going to want to recoup that money. Eliminating free checking for many customers is just another fee to help them makeup the loss. This is fee "whack-a'mole" – they eliminate one fee (over-limit) but simply replace it with another (no more free checking).

Is this happening everywhere?

We tend to focus on the 5-10 largest banks and assume that all banks are doing the same things. But that's not the case. Go small and go local (credit unions and regional banks) and you'll likely be able to avoid the checking account fees.

I want to stay with my bank. How can I avoid their checking account fees?

There are ways to avoid the checking account charges (check with your bank for your options). Using online bill pay, keeping a minimum deposit, using direct deposit...these are some of the ways. Really, this is going to impact the folks who have a little bit of money in the bank and do nothing at all with the account.

Will all large banks do this?

I’ve had enough!! What can I do to get even?

Vote with your money! If you don't like the new fees ...take your business elsewhere.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

If you are one of the millions of credit card holders who saw your credit card rates go up over the past couple years -- perhaps for some minor infraction like a payment that was a few hours late, or for no good reason at all -- then you may have taken note of a provision in the Credit CARD Act that was supposed to provide some relief.

Under the CARD Act, credit card companies are supposed to review the accounts of anyone whose rate was raised on or after January 1, 2009 to determine whether the reasons the rate was increased still apply and, if not, bring the rate back down.

The Federal Reserve recently released its guidelines describing how this process should work and for those waiting for relief, my advice is to you is: Don't hold your breath.

You can read more about the Fed's guidelines for reducing credit card rates here. But to summarize, the Fed's guidelines basically leave it up to issuers to decide what, if anything, they want to do for cardholders whose rates went up. And given their track record, I don't expect they will do much. And the first batch of reviews isn't due until February 2011. Even if issuers do lower some rates somewhat then, those cardholders will have paid a boatload of interest in the meantime. Unlike rate hikes that were in many cases retroactive before the CARD Act kicked in, these rate decreases aren't.

So while the Credit CARD Act has provided cardholders with a lot more protection than they had in the past, there are probably still a whole lot of people were wondering why it didn't do anything for them.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

If you’ve ever been charged a $39 late fee because you forgot to make your credit card payment on time, there’s (sort of) good news. The Federal Reserve Board on Tuesday approved its final rule limiting unreasonable late payment and other penalty fees.

The Credit CARD Act directed the Fed to develop rules to make sure penalty fees are reasonable and proportional to the violation in question. Here's a summary of the new rules:

Credit card issuers can’t charge a late payment fee (or other penalty fee) of more than $25, unless a cardholder is habitually paying late or otherwise breaking the credit card agreement, or unless the issuer can demonstrate that a higher fee is justified based on the cost of processing those transactions. (In addition to late fees, most cardholder agreements allow issuers to charge NSF fees for bounced payments. Overlimit fees are allowed only if you’ve opted in to allowing your card issuer to authorize transactions that put you over your limit.)

A $25 fee may not even be allowed in some situations. That’s because issuers will no longer be allowed to charge penalty fees that exceed the dollar amount associated with the violation. That means, no more $39 late fees because you made your $20 minimum payment late. Instead, in that case, the fee would be capped at $20.

And inactivity fees are banned outright. Issuers who want to charge cardholders who don’t use their cards will have to rely on annual fees unless they can come up with something more creative that doesn’t draw the ire of the regulators.

Tomorrow, I’ll discuss the other part of the Fed’s ruling that requires issuers to reevaluate recent interest rate increases and, if appropriate, reduce the rate. These rules are effective August 22, 2010.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

The Fed sided with banks and other credit issuers. So begins a recent FoxBusiness newsstory describing the findings of a new study weighing the need for business credit card reform. In case you missed it, here’s a quick summary:

Who/What: The Federal Reserve has released its Report to the Congress on the Use of Credit Cards by Small Businesses and the Credit Card Market for Small Businesses.

Why: The study was mandated by the Credit CARD Act that protects consumers against retroactive rate hikes and unfair billing practices, among other things. That law does not apply to business credit cards. In general, Truth In Lending Act protections do not apply to small business cards (except for protections against unsolicited cards and liability limits for fraudulent use).

What the Fed found: While a large majority of small businesses use credit cards (83%), many fewer carry balances (18%). Small business loss rates are generally 20 – 30% higher than that for personal credit cards, and they often require higher credit lines.

The study also described how many small businesses are getting rejected for small business loans, but the majority (nearly 75%) are still being approved for credit cards. In the end, it looks like what won out was the fear that these loans of less resort may be harder to get.

The study concluded that the benefits of extending CARD Act protections outweigh the risks of a reduction in credit availability.  It's worth noting, though, that Bank of America announced earlier this year that it would voluntarily extend many of the CARD Act protections to its small business credit cards.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.