Rising bank fees and what consumer advocates call tricky policies are leaving many consumers feeling bruised and battered by their banks.

	Anita Dufalla, Post-Gazette Click illustration for larger version. Related coverage How to keep more of your money

Just ask Carmela Knoll of McKees Rocks.

Last month, she was hit with $544 in overdraft fees.

In many cases, the fees, at $32 a pop, were more expensive than the actual transaction. A $2.45 meal paid by debit card at McDonald's ended up costing $34.45 including overdraft charges. A $8.07 tab at CoGos cost more than $40 with bank fees.

Ms. Knoll says her trouble started when she deposited a $500 check at the teller window at a National City Bank branch and asked for her balance. What she didn't know was the figure she received included the $500 deposit, even though the bank had a hold on the check until the funds cleared.

By the time she got a letter from the bank, her overdrafts had mounted. Ms. Knoll says she tried to get the charges reversed but was repeatedly rebuffed.

"The bank told me you have to specifically ask the teller for an 'available' balance" to get a more accurate reflection of what is in an account, she said.

Ms. Knoll, who admits to frequent troubles balancing her account, says she feels blindsided by the latest mess. "When it's my fault, I don't get upset," she said. This time, she's "furious."

National City contends that it makes it clear in customer disclosures and on signs posted at branches that a customer's balance may include deposited funds that aren't yet available. The bank also "encourages tellers to talk to the client," Vice President Jeff Kastelic said.

The bank will work with Ms. Knoll on ways to prevent overdrafts and will consider refunding some of the overdraft charges, a spokesman said, adding that even with the $500 deposit her account was overdrawn.

Ms. Knoll isn't alone in her plight.

Data from regulators show that banks, thrifts and credit unions collected a record $37.8 billion in service charges in 2004, more than double what they took in 10 years earlier.

Roughly 45 percent of those fees came from customers overdrawing their accounts, according to an estimate by the Center for Responsible Lending.

Some say that's no accident.

Banks are relying on service charges as a stable source of income -- and as a way to make up for the growing number of customers taking advantage of free checking accounts banks are offering to woo business.

A Post-Gazette survey shows 17 of the top 25 local banks offer free checking, including the region's top three institutions -- PNC, National City and Citizens (See chart on this page). Five years ago, only a handful of mostly smaller banks offered free checking.

"Concessions on the pricing structure of accounts are being made up somewhere," said Greg McBride, financial analyst with North Palm Beach, Fla.-based Bankrate.com. And that somewhere, he said, includes overdraft and bounced check fees, which can hit $30 or more, and requirements that customers maintain sharply higher balances on interest-bearing checking accounts or confront fatter fees.

A less frequent, but nonetheless potentially costly fee is known as a "continuous" overdraft fee. Roughly one-third of the top 25 banks in the area charge this fee, which kicks in when an account remains overdrawn for a certain number of days.

At National City, overdrawn accounts are charged $6 a day after five days. At First National Bank, the fee is $12 every three days. Often, three days isn't enough time for a customer to receive a letter from their bank telling them their account is in the red.

Bankers point out they are in business to make money and shouldn't have to apologize for their fees. The American Bankers Association contends that the majority of consumers pay minimal fees and notes that many charges, such as overdraft fees, are avoidable.

But consumer groups say banks manipulate complicated funds availability rules and use other tactics to actually encourage customers to overdraw their accounts and run-up big fees.

"I don't begrudge banks' right to make money," said Ed Mierzwinski, consumer advocate at the U.S. Public Interest Research Group. "I begrudge the right to trick and gouge consumers."

One relatively new practice that has come under fire from consumer groups is known as courtesy overdraft protection, also called bounce protection.

Unlike traditional overdraft protection that draws on a customer's line of credit or transfers funds from another account, customers don't sign up for the coverage, they are automatically enrolled. The bank covers the overdrafts, usually up to a preset limit, for a flat per-item fee. Coverage typically includes transactions at the register with a debit card and cash withdrawals at the ATM.

The fees are deducted from the customer's next deposit. The bank also may tack on fees if the account is overdrawn for more than a few days.

Thirteen of the top 25 local banks offer some form of courtesy overdraft protection, while two more say programs are in the works.

Mr. Mierzwinski calls courtesy overdraft protection a "horror for consumers."

The way the system works, people who overdraw their accounts buying a $2 item with a debit card or by writing a $20 check still get hit with a $35 fee. Flat fees coupled with the short payback period can result in consumers being charged the equivalent of 1,000 percent interest or more.

Banks counter that they are doing customers a favor and saving them money by honoring checks that, if allowed to bounce, would result in an additional fee from the merchant.

That argument doesn't fly when it comes to debit card transactions, however, since merchants don't charge anyone if a transaction is rejected. Customers simply can't buy the merchandise.

Critics say bankers have one thing in mind, adding to the bottom line.

Indeed, bank consultants market bounce protection plans as a way for banks to dramatically goose fees.

One such vendor, Pinnacle Financial Strategies, boasts on its Web site that its clients on average are able to boost overdraft fees by 80 percent.

"Simply by adopting these programs, banks are encouraging customers to overdraw their accounts and increasing fee revenue," said Eric Halperin, senior policy counsel at the Center for Responsible Lending, a nonpartisan group in Washington, D.C.

Bob Michaud, vice president at Irwin Bank & Trust, doesn't know what all the fuss is about. He says his customers love the service.

"Customer sentiment is 100 to one in favor of it," he said. "We get very few customer complaints."

The Center for Responsible Lending and others have been pushing regulators to require better disclosure of the true cost of such programs, similar to the way banks are required to provide annual percentage rates on loans.

So far, regulators have only offered some guidelines. The Office of the Comptroller of the Currency (OCC) and others have recommended that banks sign customers up for the service instead of automatically enrolling them, or at least give people the option of canceling it.

Where feasible, banks also should give customers advance warning if they are about to trigger overdraft fees, the OCC said.

Among the local banks offering courtesy bounce protection, so far only PNC and S&T Bank say they alert customers with an on-screen message that they are about to trigger overdraft fees at the ATM. Technology doesn't yet allow them to give a similar warning at the register for debit transactions, PNC said.

But PNC says it does offer a free auto-alert service to help customers keep better track of their balances. The service, which requires customers to sign up, notifies them by e-mail when an account falls below a preset level, or when an account has been hit with an overdraft fee.

Another criticism of bounce protection plans is that they often are packaged with free checking accounts, targeting people with little reserves.

Customers with free checking can face other drawbacks, too, such as being charged for products or services that are free to other customers.

Experts say consumers can reduce fees by shopping around for banks with the best deals on services they use the most. Ms. Knoll of McKees Rocks says she's angry enough that she just may do that.

But, she added, she isn't sure switching would do any good. "I'm seriously looking into changing banks," she said, "but I don't know that any one would be better."