Don’t Pay These New Hidden Fees

Watch out for these sneaky ways that you are nickel-and-dimed.

By Max Alexander from Reader's Digest | June 2007

Don’t Pay These New Hidden Fees
 Once, when I was kid, I paid $3, a week’s worth of lawn mowing, to see the Alligator Lady at the county fair. “Half reptile and half woman!” the promoter barked. I was hooked. When I got inside, all I could see was her silhouette. “Whaddaya think, electricity is free?” demanded the carny. I coughed up the 50-cent electrical surcharge, the lights came on — and the Alligator Lady was revealed to be a woman in a bathing suit with a bad case of eczema. How could I be such a sucker?

These days, fees no longer surprise us, and companies know that. In fact, many businesses are raising fees. “Consumers have not revolted, so companies are getting bolder,” says Diane Clarkson, a travel industry analyst at JupiterResearch. “They’re charging for more things, and charging more for them.”

As a result, Americans are paying billions of dollars a year in fees that are not part of the advertised price, on everything from late credit card payments to battery disposal to clean sheets when you stay at a hotel. (Can I waive the housekeeping fee if I use the last guy’s towels?) Here are some of the most felonious fees, plus tips on what you can do about them.

Many telecom surcharges are called junk fees because they don’t account for anything special but simply reflect the true cost of doing business — like the “Federal Subscriber Line Charge” of $12.78 that I pay Verizon every month for my two home phone lines. It sounds official and unavoidable, but according to the Federal Communications Commission (FCC), this so-called federal surcharge “is not a tax or fee charged by the government.” In fact, it goes right into Verizon’s pocket. Poring over the fine print on my phone bill, I learn that the fee “funds part of the cost of providing long-distance companies access to local telephone networks.”

Well, duh. How else would I call my mom in Arizona? If my regular monthly bill of $37.95 per phone line (plus long-distance charges) isn’t enough to cover the cost of hooking me into the system, why don’t they just charge more, instead of sneaking in a 17 percent junk fee on the back end?

Competition is the reason. “Companies know that consumers are price-conscious,” says Edgar Dworsky, a former assistant attorney general for Massachusetts who now runs consumer advocacy websites, including mouseprint.org. “They advertise an attractive price to get the consumer’s attention, rather than reveal the complete price, which is far less attractive.” If not downright ugly.

Other oddball fees turned up on my Adelphia cable bill, like the 6-cent monthly “FCC Regulatory Fee.” This simply reimburses the cable company for what they are charged by the FCC — in other words, a cost of doing business. The 49-cent “Franchise Fee” reimburses Adelphia for what they pay my local community for stringing their lines along the right of way. You got it: I have to pay extra for the cable.

The latest billing trend is what consumer advocates call un-fees. They point to a case last year, when the FCC stopped requiring DSL Internet providers to contribute to the Federal Universal Service Fund. (Telecom companies collect the FUSF to help pay for wiring libraries and improving Web service in poor and rural areas.) When DSL providers no longer had to pay the fee, they stopped charging it to customers, right? Not quite.

Within two weeks of eliminating the monthly FUSF fee of $1.25 or $2.83 (depending on the speed of your Internet service), Verizon Online initiated a “Supplier Surcharge” of $1.20 or $2.70 a month (again, depending on your speed). Was it a coincidence that the new fee was almost exactly the same as the old FUSF fee? Bobbi Henson of Verizon explains that the company had spent a lot of time and money developing its DSL service but did not want to pay for it by raising customers’ bills. “When the FCC charge was eliminated, we decided it was a good time to distribute the cost fairly across our whole customer base,” she says. But customers complained loudly enough that Verizon withdrew the new fee.

What You Can Do
Shop around and indicate to each phone and Internet supplier that you are considering your options — cable, DSL or satellite. Let them know they can’t take your business for granted. You might consider eliminating your landline in favor of cell phone service only. And if you make lots of long-distance calls, check out Voice over Internet Protocol (VoIP) systems like Skype.

Hot Tip
Dialing directory assistance from your cell phone can cost as much as $3.49. Call 1-800-FREE411. In return for listening to a brief ad, you pay nothing.