Hidden fees boost consumers’ costs by billions of dollars a year
If you look closely, fees are lurking almost everywhere. Cellphone companies, cable-television providers and banks, for example, tack on fees to the prices they charge. Resort fees can add $10 to $30 per night to a hotel bill. Various fees can bump up the cost of a ticket for a concert or sporting event by about 25 percent.
Car dealerships charge documentation fees on new vehicles that can run hundreds of dollars, and then they add fees to prepare the car. Airlines — at least some — are notorious for the fees they charge to check a bag or choose a seat. And fees can add 20 percent to the cost of tuition at a four-year college.
Add it all up, and consumers are paying billions of dollars a year beyond the advertised price for the goods and services they buy, consumer advocates say.
“(Companies) get away with it because these marketplaces aren’t competitive,” said Mark Cooper, director of research for the Consumer Federation of America, who has written on the topic. “There’s a bit of a wink and a nod that makes it easy when you don’t have competitors.”
A report issued in December by former President Barack Obama’s National Economic Council found that these fees are meant to get consumers to buy things that they wouldn’t otherwise buy if they knew the full cost in advance.
“In other words, people are more likely to buy something that appears to cost $80 with $20 added later, than something that is priced at $100 upfront,” the report said. “The most straightforward explanation is that some or many consumers do not focus on the full price, but rather buy on the basis of the lower prices and are therefore deceived.”
Doing the math
The fees add up. Fees at resorts throughout the United States rose to a total $2 billion in 2015, the report said. Ticket fees for games and concerts added $1.6 billion to the cost of going to events in 2015. Baggage fees charged by airlines topped $3 billion in 2016, according to the U.S. Department of Transportation.
Some cellphone companies have started to add a “regulatory cost recovery fee” and an “administrative fee” that can add several dollars a month above the advertised priced to a phone bill.
In one case investigated by the Consumer Financial Protection Bureau, a bank that advertised a “free checking account” with “no strings attached” converted those accounts to ones that cost between $5 and $14 a month.
Dennis Secro, 68, of Grandview Heights, says fees add about 25 percent to the price of a ticket for Crew matches and concerts that he buys, and he often doesn’t know what the fee is until he gets to the event and picks up his ticket.
“It’s like a monopoly,” he said. “They got you and charge whatever they want.”
When Ashlie Hannah, 33, of Columbus, booked a company trip and paid for it in advance, the executives were hit with a $25-pernight “resort fee” that added $300 to their hotel bill for the trip.
“There was no getting out of it. It almost seems illegal,” she said. “It seems like a bait and switch.”
Fees imposed by airlines — baggage fees, seat fees, change fees and other costs — make it impossible to actually figure out what an airline ticket costs, said Charlie Leoach, president of Travelers United, a nonprofit group that represent travelers.
“The more hidden fees, the more complex the process, the more difficult for consumers to comparison shop,” he said. “There’s no way to comparison shop. I’ve had this argument all the time with the airlines.”
Price just the start
Hannah said she was intrigued by a good price that she saw for a ticket on a low-cost airline that flies out of Rickenbacker Airport. But then she found that the fees for the flight ended up doubling the cost ofthe ticket.
“You feel completely hoodwinked in the end. ... There were fees on top of fees. It just kept coming. I was really surprised with that,” she said.
The airline industry says that it is more transparent when it comes to fees than most other industries.
“Airlines strongly support full transparency and already ensure that all pricing information is available so consumers know exactly what they are buying when they purchase a ticket,” said Kathy Grannis Allen, spokeswoman for the Airlines for America, which includes many of the nation’s biggest airlines.
The hotel industry defends resort fees, saying they are meant to provide consumers with the best value by grouping amenity fees that cover things like breakfast, area transportation and use of fitness clubs, into one cost.
“It would be inconvenient to the guest and unworkable to the hotel to offer all of these amenities on the property and have the cost be optional,” the American Hotel & Lodging Association said in information posted on its website about these fees.
Cooper said consumers are in a tough spot, but the key is trying to get as much information as possible before making the purchase.
“Make sure you know exactly what it costs,” he said. “The harder they make it to find out the real price, to make apples-to-apples comparisons, the more you go with the company that’s being transparent.”