Most common hidden ‘junk fees’ and how much they cost you
"Junk fees" are exactly what they sound like: A spate of additional, hidden charges that companies pass on to the consumer that cost little (or nothing) for them to provide.
The charges increase the total cost of many goods and services including concert tickets, hotel rooms, gym memberships, cable subscriptions and utility bills.
But the fees have become widely unpopular among American consumers, with a recent study showing that nearly nine in 10 general election voters in battleground congressional districts want Congress to pass laws banning or limiting them.
Biden proposes Junk Fee Protection Act
The Biden administration recently drafted a bill, known as The Junk Fee Prevention Act, which requires businesses to clearly display the full price of their products and services, including all fees, in every advertisement and initial consumer interaction. The bill also establishes requirements for businesses that provide short-term lodging, ticketing services, internet service, mobile service, or video programming.
Young woman looking at utility bill. (Credit: David Potter/Construction Photography/Avalon/Getty Images)
If passed by Congress, it will limit the ability of companies to levy certain fees.
Last week, a federal judge in Texas temporarily halted a plan by the Biden administration to lower late fees on credit cards to $8 that was slated to go into effect this month. The temporary injunction imposed by Judge Mark Pittman in the Northern District of Texas is a win for the big banks and major credit card companies, which collect billions in revenue each year in late fees and were looking to stop the proposal from going into effect. It is also a win for the U.S. Chamber of Commerce, which led the lawsuit on behalf of the banks.
Most common junk fees
Whether you’re purchasing concert tickets or canceling a gym membership, here’s a list of the most common junk fees.
Checkout fees: Often junk fees don’t appear until the final pages of a checkout process, such as service charges for concert tickets, airline tickets and seating fees, resort fees for hotel stays, or other products with "processing charges."
Restaurant living wage fees: Some restaurants include a "living wage fee," which helps the restaurant better pay staff. Some businesses have added a health care surcharge to help cover the cost of offering employees benefits. The surcharge became more popular during the COVID-19 pandemic, but has continued.
Late payment fees: Late fees are penalties for not paying a bill by the due date, and this can be major sources of revenue for companies. Of the $23.6 billion fees charged by card issuers in 2019, $14 billion came from late fees alone, according to the Consumer Financial Protection Bureau.
Termination fees: There are sometimes hidden fees included in a bill for terminating a phone or internet service.
Fees to Pay Your Bill: Banks commonly charge fees to accept payments on your bill, such as the ability to transfer payments, conduct a foreign transaction, or even pay bills online. These are sometimes called "convenience fees."
Prepaid card fees: For people who are unbanked, prepaid cards provide critical access to basic financial services. While someone may choose a card based on their monthly fee structure, they often find additional and unadvertised fees for basic use of the card.
Closing costs and homebuying fees: Owning a home has historically been one of the best ways to build wealth. However, fees associated with closing on a home, such as document preparation or title insurance, can act as a significant barrier to families trying to buy a home or refinance and can significantly cut into household equity.
Cost of junk fees
Lael Brainard, director of the White House National Economic Council, said research indicates that hidden fees can cause consumers to pay as much as 20% more than they would have had they known the total cost up-front and comparison shopped.
RELATED: Airlines file lawsuit over Biden's 'hidden junk fees' crackdown
The Federal Trade Commission also estimates that consumers waste 50 million hours each year searching for the total price for tickets and lodging.
The time saved in those two categories because of the rule would be equivalent to about $1 billion annually, the agency estimates.
How to avoid junk fees
To avoid hidden charges, consumer watchdog Public Interest Resource Group recommends taking these steps.
Question costs: It’s important to question any cost that isn’t made clear at the outset. This could be a "company charge" added to a phone or utility bill or a "service fee" buried in terms and conditions. Sometimes optional charges are given official-seeming names to discourage consumers from asking questions.
Comparison shop: If you’re uncertain whether a fee is necessary, you may want to comparison shop. Another merchant may have a more reasonable price without the mysterious added charges.
Pay by credit card: Questionable and undisclosed fees are easier to dispute when paying with credit.
Keep paper trail: Keep copies of receipts, emails, texts, and other communications. If you experience a surprise fee, you can more easily complain to the company, state attorney general, or FTC.
This story was reported from Los Angeles. The Associated Press contributed.