Businesses add $90 billion in surprise 'junk fees' each year, and it's starting to backfire
JIM VONDRUSKA/Reuters
- Businesses are adding $90 billion in fees to consumer's bills each year, according to one estimate.
- US consumers spend more than $650 a year per household on "junk fees," per the CEA.
- Some are fighting back by choosing businesses that give upfront prices to reduce their spending.
Businesses are adding $90 billion in surprise "junk fees" to customers' bills each year — and it is starting to backfire.
Junk fees are hidden costs that are added to product prices. We see them on everything from restaurant menus to concert tickets and flight booking sites.
And according to estimates by the White House Council of Economic Advisers, Americans are spending more than $90 billion a year— more than $650 per household — on junk fees, including live event tickets, internet and cable fees, apartment rentals, banking fees, and more.
These are often added at the end of a purchase, making it tougher for consumers to compare shops for the best offer, resulting in them spending up to 20% more, according to a working paper by the National Bureau of Economic Research.
Some are now taking matters into their own hands, by choosing businesses that give them upfront prices.
Noelle Weaver and Bradley Walker told The Wall Street Journal they adopted this approach with hotels and rental cars after seeing the cost of a four-night stay in a New Orleans hotel rise from what they thought would be $719 to nearly $1,100, with the hotel charging $235 in taxes and fees, and $50 for early check-in.
"I just want to know what it's going to cost instead of feeling the bitterness of getting upcharged at every turn," Walker told the outlet.
Merrilee Bridgeman told the Journal she experienced the same issue in a local salon in Charlotte, North Carolina, where she was forced to pay an extra $5 hair-washing fee on top of her daughter's $40 cuts and her $100 haircut.
"It just felt off-brand and adds to the fatigue that we already feel about having to watch so carefully when we're ordering and checking out," she told the newspaper.
Last June, President Joe Biden said his administration had taken steps to crack down on junk fees. He said it did this in part by reducing overdrafts by $5.5 billion a year, and bounced-check costs by $2 billion a year.
In April, a Democratic member of Congress introduced the Junk Fee Prevention Act to try to limit and eliminate excessive, hidden, and unnecessary fees.