- Junk fees are everywhere in the online retail environment.
- Businesses do their best to hide these fees.
- Consumers often don’t remember or fully take into account these fees.
If you are anything like me, you have probably noticed an unpleasant trend recently. Whether it be online shopping, booking a flight or rental property, or buying a ticket to a concert or sporting event, everyone is nickel and diming me to spend more money than I wanted to by adding junk fees on top of purchases.
As someone who prides themselves as a professional cheapskate, these fees drive me crazy. In fact, junk fees have become such an issue that U.S. President Joe Biden declared a “war on junk fees” in his most recent State of the Union address to the American people, making the point that we are tired of being played as suckers.1 No matter which side of the aisle you stand on politically, I am willing to bet you hate these fees, too.
Junk Fees Everywhere
Service fees, booking fees, credit card fees, fulfillment fees, termination fees, processing fees, and convenience fees are the types of charges I am talking about when I use the term “junk fees.” Sometimes these fees are relatively minor whereas other times they constitute a more substantial portion of the bill. Among the worst offenders of passing along junk fees to the consumer are online ticket vendors (e.g., concert tickets and sports tickets). It seems impossible to find a vendor who does not charge additional fees. If you purchase a ticket, you end up paying the ticket price in addition to a garden variety of additional charges that include (but are not limited to) sales tax, a service/convenience fee, and a fulfillment fee.
One of the reasons these fees are so frustrating is that there is usually no way to avoid them. And certain costs are disliked more than others—in the example above, you are probably more open to the sales tax than the fulfillment fee (even though you probably are a bit irritated by the tax as well). This is because consumers do not understand what these fees go toward, and they do not like or trust vendors who charge them. I have many stories here, but the most recent example involves taking an Uber. When I got the receipt via email, I noticed I was charged a booking fee for my ride! I “booked” the ride thru the Uber app (insert eye roll). How can businesses get away with this?
How Businesses Get Away With Charging Junk Fees
There are a couple of reasons why I believe businesses can get away with charging junk fees to their customers. The first reason is due to the options we have. When it comes to buying tickets to a concert, it is virtually impossible to find a vendor who does not charge additional fees. So, if you want to catch the show, you have no choice but to accept the fee. The two giants in this space (StubHub and Ticketmaster) are both notorious for strapping on junk fees, and they have a duopoly on tickets to most major concerts and sporting events. This leaves us stuck with a single choice: Do we accept the annoying fees and see the show, or do we not buy the ticket and miss out? If you are like most people, you probably swear under your breath and purchase the ticket with the junk fees so you don’t miss out.
The second reason that businesses can get away with passing on junk fees to the customer is due to a psychological quirk. Online retailers usually hide additional costs until the checkout page in a sneaky way, a tactic called drip pricing. They hook us in with a low sticker price.2 Once we have put an item in our shopping cart, we are enthusiastic about the product or experience we are buying. Then we realize we’re going to have to pay a bit extra once we look at the final price. We are excited, and we feel like we’re losing out on what we want if we refuse to make the purchase even though it costs more than initially advertised.
Although consumers hate junk fees, they might be here to stay. We don’t usually remember paying them after the fact. For instance, if you book a rental property that is advertised as $100 per night, you will likely remember paying this price of $100 later on even though at checkout the price was $140/night (with taxes, cleaning fees, booking fees, etc.).
They take advantage of consumers and, after doing a lot of research on junk fees, I am dumbstruck at what some of them actually go toward. My hope is that new market entrants can gain market share by charging fair-and-square pricing, or for the government to step in and crack down on junk fees as Joe Biden mentioned. I encourage you to look for a better vendor if you receive a surprise junk fee at checkout and don’t be afraid to call these retailers out on review platforms for charging junk fees. As consumers, the battle against junk fees is one we are losing. But I hope it becomes a war that we win in the end.
2. Santana, S., Dallas, S. K., & Morwitz, V. G. (2020). Consumer reactions to drip pricing. Marketing Science, 39(1), 188–210.