The Gap Between the Price You See and What You Pay Is Getting Worse

Surprise fees are widely hated, but they are still sneaking onto the bottom of bills for everything from concert tickets to dinners out.

More companies are unbundling the cost of their goods and services, retail analysts say, tacking on 3% for swiping a credit card or adding a little extra for gas. With Live Nation Entertainment facing scrutiny over its ticketing process, singer Maggie Rogers recently urged her fans to buy tickets to her next show at the box office “like it’s 1965” to avoid fees, even showing up at one herself. The Cure’s Robert Smith, meanwhile, convinced Live Nation Entertainment subsidiary Ticketmaster to offer some fee refunds.

The upshot is that prices we see, whether on a restaurant menu or flight-booking site, are rarely the ones we end up paying.

Business owners say fees are needed to cover costs and show customers where their money is going. But retail analysts and advocates like the Consumer Financial Protection Bureau (CFPB) say secondary fees diminish people’s ability to shop around. CFPB data also show fees cause people to pay more overall because businesses can charge more than what the market will let them get away with in the sticker price.

“People don’t shop based on fees. They shop based on the price of the product,” a CFPB spokesman says.

So widespread is the tactic that President Biden is making a fee crackdown one of his administrative priorities. His administration estimates that Americans pay more than a collective $90 billion in what the president has dubbed “junk fees” each year, including those for credit cards, food delivery, bank overdrafts and event tickets.

Congress introduced a bill last April to “limit and eliminate excessive, hidden, and unnecessary fees imposed on consumers,” while similar measures have recently passed the New York and Illinois state senates. California, too, added restaurants to the list of industries covered under its existing hidden-fee ban.

Fees, please

Noelle Weaver and Bradley Walker say they now base their hotel and rental-car selections upon whichever companies will give them one flat, upfront price.

“I just want to know what it’s going to cost instead of feeling the bitterness of getting upcharged at every turn,” says Walker, a 51-year-old creative director for an ad agency.

Their approach follows a series of off-putting experiences, including a New Orleans hotel they say was more focused on “getting every dollar they can” than on ensuring they would want to return. What they thought would be a $719, four-night stay became nearly $1,000 after their receipt shows they paid an additional $235 in taxes and fees. The hotel also charged $50 for early check-in. They declined to pay to use the gym.

“They wanted us to pay an upcharge for all the things that are actually free to the hotel,” says Walker, who lives in Greenwood Lake, N.Y.

In Charlotte, N.C., Merrilee Bridgeman took issue with what she says a local salon explained to her as a $5 mandatory hair-washing fee on top of $40 cuts for her daughter and $100 for her own. (She asked if they could just spray her hair and skip the shampoo.)

“We’re choosing to go to a beautiful salon in a nice part of town that serves you tea when you arrive, and then they’re going to nickel-and-dime us over two tablespoons of shampoo?” says Bridgeman, 58, who works in marketing for a bank. “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.”

Alexander Chernev, a professor of marketing at Northwestern University’s Kellogg School of Management, says that beyond the effect on people’s pocketbooks, surprise fees feel unfair.

He recounted mailing a standard letter envelope of tax documents via FedEx a few weeks ago. What he expected to cost about $10 turned into $38 after various fees, including $5.38 for fuel and another $4 to pick up the envelope from a Northwestern mailroom.

“It diminishes the relationship a company has with its customers,” Chernev says.

A FedEx spokeswoman says the company lists all of its rates and fees on its website, and that it uses surcharges to manage fluctuations in fuel prices.

Dining out and in

In Brooklyn, N.Y., event planner James Fairbrother says food-delivery fees are now so high that he can rarely rationalize the convenience.

“The fees wind up being equivalent to half what the actual order will be, to the point where sometimes I cancel the order,” says Fairbrother, 33. He cites a recent delivery from an Italian restaurant where taxes, fees and tip added $21 to the $48 food bill.

He also has scaled down his concert attendance from over a dozen to two or three a year due in part to fees that he says feel arbitrary.

The National Restaurant Association reported that 16% of restaurants added a surcharge of some kind to customers’ bills in 2023, up from 15% in 2022, the first time the association asked the question.

Triple T Hospitality didn’t expect much customer pushback when the New Jersey-based company rolled out a 3% cash discount to its chain of restaurants across the Northeast in 2022.

“We felt it was an opportunity to say, ‘Yes, our costs are going up, but there is still a way for it to not affect you,’ ” Chief Financial Officer Christopher Dietz says.

Customers didn’t see it that way.

“They weren’t upset about paying a little more. They were upset about how they were paying a little bit more,” Dietz says. Almost nobody switched to cash.

Though the restaurants plastered the cash-versus-card difference onto every menu and over the host stands, Dietz says customers were put off when they saw the charge at the bottom of their bill. Some complained publicly via the restaurants’ online reviews.

The company reversed course after about a year, folding the increased credit-card fees they were facing into menu prices.

Dietz understands where his customers were coming from. He’s noticed the uptick in fees, too.

“I’ve just come to expect differences between posted prices and actual prices for most of what I spend money on,” Dietz says.

Write to Rachel Wolfe at [email protected]