Don’t Pay These New Hidden Fees
Know what to look for so you don’t have to pay.
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.
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.
A few years ago, airlines started charging $5 to book your ticket with a human on the phone (as opposed to using the website); now many have upped that fee to $15 or $20, says Clarkson, the travel industry analyst. Need to change the date of your return? That’s likely $100; a few years ago, $50 was the norm. “It was more of an inconvenience fee before,” she says. “Now it’s a revenue stream.”
Clarkson’s biggest pet peeve is the now ubiquitous fuel surcharge, which airlines began to levy as oil prices shot up. Since fuel is rather essential to flying, consumer advocates wonder why higher energy costs aren’t simply included in the fare. “It’s like buying a book and paying a paper surcharge because the cost of timber is going up,” says Clarkson.
Current laws require airlines to include fuel surcharges in the advertised fares, although some airlines have lobbied the U.S. Department of Transportation to deregulate the ads so they can “unbundle” surcharges. As it is, surcharges are hard to track because airlines change them frequently. Most typically run $20 to $30 per round-trip ticket, but the sky seems to be the limit. On its website, United Airlines says its international flights (including trips to Puerto Rico and the U.S. Virgin Islands) can incur fuel surcharges of “up to $150 per direction of travel, and which are subject to change at United’s discretion, without notice.” Uh, thanks.
Hotels are joining in the fee-for-all, and like everyone else, they’re getting bolder. “Hotel guests expect to pay a ridiculous amount for the macadamia nuts in the mini bar,” says Clarkson, “but they don’t expect to pay to have the mini bar restocked.” Some hotels are charging fees for telephone service even if you don’t use the phone.
I wanted to visit my mom in Arizona. The Omni Tucson National Golf Resort & Spa had a “Net-savvy rate” of just $189 a night. I went to confirm the reservation and — aha! — there was a $12 nightly “resort fee,” which made the room actually cost more than $200 a night (not including taxes).
I called the reservations line for Omni Hotels and asked about the Tucson charge. The guy on the phone seemed stumped. “Well, it’s a resort,” he said finally. “There are two Jacuzzis, two pools, a sauna, a steam room, workout equipment, tennis courts …”
Obviously this was just another way to pile profit onto the back end. I wondered if it was negotiable. “I’ve got a lousy backhand,” I told him. “What say we forget the tennis and call it even?”
“You’ll still have to pay the fee,” he said nervously.
“What if I promise to stay in my room and work on my laptop the whole week?”
“I’m afraid not.”
“Have you ever seen the Alligator Lady? Oh, never mind.”
What You Can Do
Before booking a plane ticket, check the total, including taxes and fees. Make sure your checked luggage is within size and weight limitations (available on airline websites) to avoid extra fees. When making a hotel reservation, inquire about fees, and refuse to pay those for services you won’t use.
At the rental-car counter, skip the up-front gas fee that allows you to return the vehicle empty. You’ll only end up paying for gas you don’t use.
Break-the-Bank FeesFees used to be levied by banks to discourage bad behavior, like bouncing checks. But fees have become a profit center for the banking industry, accounting for billions of dollars in revenue. Take those checking account overdraft charges, which are at an all-time high, according to Bankrate.com. The average bounced-check fee is a whopping $27.40. That’s a 50-cent increase over the last year.
Even more outrageous are the insane late fees credit card companies charge when you miss your payment deadline. We’re talking an average of $31.37 — up 14 percent from $27.44 in 2002, according to CardData. And credit card issuers are charging the fees with alacrity, often if a payment is late by just a few hours. Last October the Government Accountability Office released a study that criticized the confusing array of fees charged by credit card issuers — from balance transfers to paying by phone to using the card overseas. “There are so many credit card fees and penalties these days that consumers need a scorecard to keep track,” said Sen. Carl Levin (D., Mich.), who requested the study.
What You Can Do
To avoid most banking fees, pay your credit card bill on time and don’t bounce checks. Consider paying electronically so the money is transferred immediately. It also pays to ask: Sometimes banks will waive monthly service charges or penalties if you’re a good customer.
Forget about interest-bearing checking accounts. They typically require a huge balance ($2,660 on average, says Bankrate) to avoid service fees of around $10 a month, and they pay paltry interest (0.34 percent in the latest Bankrate survey). You’re better off with a free or cheap non-interest checking account, and stashing the extra cash in a money market fund.
If you think there ought to be regulatory laws, dream on. The government is a major player in the sneaky-fee game. With voters revolting against higher taxes, politicians are imposing fees to pay for everything from civic centers to libraries.
Taxes that would never pass muster with voters are instead fobbed off as “fees” on powerless visitors. Thus, a hotel room in Chicago will cost you 15.4 percent in taxes, one of the highest lodging rates in the nation. Likewise, a rental car in Dallas carries a 5 percent fee to finance a stadium, completed in 2001, for the NBA Mavericks.
I like basketball, but it sticks in my craw that when I, a Boston Celtics fan, rent a car in Dallas, I have to subsidize a rival team’s stadium!
Personally, I go along with Clarkson, who says: “I’m a huge proponent of the customer complaint. Don’t just tell the manager; write a letter to the most senior marketing person saying, ‘Your fees are not acceptable and I want a refund, or you will lose me as a customer.’ That puts a lot of hesitation into marketers’ minds when they consider implementing these fees.”
Good advice — which I plan to take with me to the next county fair.