Smart Money Podcast: Money News: What’s the Deal With ‘Junk Fees’?
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You don’t have to be a Taylor Swift fan to feel like you’re being personally attacked by hidden fees and surcharges. These so-called junk fees can be unrelenting, but the tide may be changing. In this Money News episode of the Smart Money podcast, NerdWallet's Sean Pyles and Anna Helhoski discuss the latest on junk fees and what you can do about them.
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Sean Pyles: You know what's been driving me up the wall lately, Anna?
Anna Helhoski: What's that, Sean?
Sean Pyles: Fees, surcharges. Why can't I rent an Airbnb and see the whole cost until the very end?
Anna Helhoski: I know. Why do I have to pay a service fee on top of a facility fee on top of a credit card fee just to buy one concert ticket? It's really maddening, and I have a feeling that it's probably something our listeners are pretty tired of, too.
Sean Pyles: Yep. Welcome to the NerdWallet Smart Money podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I'm Sean Pyles.
Anna Helhoski: And I'm Anna Helhoski. If you have questions about how to avoid getting ripped off by fees or anything else money related really, leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD, or you can email us at [email protected]
Sean Pyles: So Anna and I are both pretty annoyed by pesky fees, and listeners, I assume you probably are, too. So let's get into it. Those fees actually have a name, right, Anna?
Anna Helhoski: Yep. They're called junk fees. They're the surcharges you pay on things like your credit cards, air travel and hotel rooms. The Consumer Financial Protection Bureau has a pretty solid list of the types of fees that probably sound familiar to listeners, like overdraft fees, late fees, convenience fees, prepaid card fees, closing costs and homebuying fees. The CFPB also points out fees associated with servicing auto loans, mortgage loans, payday and title lending, as well as student loans. And you often see them at the back end of transactions.
Sean Pyles: So when booking a hotel room online, for example, it says this is the room rate, and then when you're checking out, suddenly there's a "resort fee" on top of the room rate.
Anna Helhoski: Exactly. Resort fees usually cover services and amenities above and beyond the room rate, but they're charged nightly, not for the whole stay, so they can really add up.
Sean Pyles: Yeah, and overdraft fees are another common junk fee, too, right?
Anna Helhoski: They are. And the CFPB says most of them cost between $30 and $35. So if you overdraft by $5, you have this fee tacked on top of it, and suddenly you're paying $35 or $40.
Sean Pyles: Yeah, there was a time in my life when money was really tight, and I was all too familiar with the sting of overdraft fees. They're particularly insidious because it can feel like when you're low on cash, this big fee is just kicking you when you're down.
Anna Helhoski: Yeah, same here, Sean.
Sean Pyles: Another one I've heard about recently is fees when parents want to sit next to their kids on flights.
Anna Helhoski: That's right. If you're booking tickets for your family and you and your child are separated, usually you have to pay a fee in order to move seats so your child doesn't have to sit by themselves. The Department of Transportation actually has this dashboard that lists the carriers that do and don't offer fee-free seatings, and most do not.
Sean Pyles: I want to talk a little more about concert fees like you mentioned earlier. These have made many a headline in the past six or so months, usually in the context of Ticketmaster shenanigans. For the non-Swifties listening, Anna, can you give us a rundown of why this company is nearly synonymous with junk fees at this point?
Anna Helhoski: Ticketmaster basically has a monopoly on concert ticket sales. Consumer advocates say Ticketmaster owns an estimated 70% of the live event ticket brokering market. They have deals with venues and artists that result in consumers having no other choice but to pay Ticketmaster's fees, which, let me tell you, will add up quick. Ticketmaster has also been in trouble for not being upfront about how many tickets it has available for sale.
Sean Pyles: So back in November, demand for Taylor Swift tickets overwhelmed Ticketmaster; the ticketing giant abruptly canceled its public sale of tickets for Swift's Eras Tour after prematurely outselling its inventory of tickets; Swifties filed a class-action lawsuit accusing Ticketmaster of fraud, misrepresentation and antitrust violations.
Anna Helhoski: And it led to a Senate Judiciary Committee hearing where a lot of senators revealed they were Taylor Swift fans by using some really cringey song title puns and quips.
Sean Pyles: And more recently, Ticketmaster was in trouble with fans of The Cure, myself included, even after the band tried to get ahead of exorbitant fees by saying it would offer affordable tickets for its North America tour.
Anna Helhoski: I can tell you, Sean, as a really avid concertgoer that the price would've been affordable, too, about $20 per ticket, which in this day and age is pretty much unheard of. I saw a Twitter user who said on top of that $20 ticket, she was charged per ticket a service fee of $11.65 and a facility charge of $10. And in addition, there was a processing fee tacked onto the full order. The total was $27 in fees on top of a $20 ticket. It's so gross.
Sean Pyles: Gross, outrageous, all of those things. But there's not a lot that people can do about it.
Anna Helhoski: No, not yet, at least.
Sean Pyles: OK. But there is maybe some good news for us junk fee haters. It looks like these charges are on the White House's radar and on Congress', too. President [Joe] Biden called out junk fees in his State of the Union address earlier this year:
Joe Biden: Junk fees may not matter to the very wealthy, but they matter to most other folks in homes like the one I grew up in, like many of you did. They add up to hundreds of dollars a month. They make it harder for you to pay your bills or afford that family trip. I know how unfair it feels when a company overcharges you and gets away with it. Not anymore.
Sean Pyles: On March 22, two senators, Richard Blumenthal and Sheldon Whitehouse, introduced the Junk Fee Prevention Act. The same bill was introduced in the House by Reps. Ruben Gallego and Jeff Jackson. But what would this bill actually do?
Anna Helhoski: A few things, but I'll give you the key points. For hotels and ticketing service providers like Ticketmaster, it would require the full price of services to be disclosed upfront. It would also bar excessive fees, and it would force ticket companies to publicly disclose the total number of tickets available. For cable TV, internet and mobile phone companies, it would end early termination fees and require all mandatory fees to be disclosed. And finally, it would require airlines to provide children 13 or younger a seat next to a family member without having to pay a fee.
Sean Pyles: So that all sounds like pretty welcome news to a lot of consumers out there, but it's just a proposal right now, and Congress is pretty divided. Are junk fees something that has bipartisan support?
Anna Helhoski: Depends how you look at it. So my murky answer is sort of. A February 2023 poll by Morning Consult found support among Democrats, Republicans and independents, about 3 in 4 Americans, that support limiting junk fees, but that's public support, which doesn't always correlate with support by their representatives. So the bill was introduced by two Democrats and has the support of a president who is obviously also a Democrat.
There's been some pushback against banning certain junk fees in the past from Republican members of Congress. In September, Republican senators who sit on the Senate Banking Committee sent a letter to the CFPB arguing against its efforts to curb overdraft fees, saying that "Charging fees that customers chose to pay should not be disturbing or illegal. And yet the CFPB appears to have developed a particular disdain for banks charging their customers for services, pejoratively calling overdraft protection 'junk fees.'" But then again, when it comes to Ticketmaster, there does seem to be bipartisan support or at least lots of annoyed music fans on both sides of the aisle.
Sean Pyles: Got it. So this new bill is out, but it's presumably going to take some time to move through Congress, if it passes at all, before it lands on President Biden's desk. What can people do for now?
Anna Helhoski: Consumers should first try to do some comparison shopping. Search for products or services that have lower or no fees. But like we mentioned with concert ticket fees, it can be pretty unavoidable. Sometimes you might just have to suck it up and pay the fees. Otherwise, there's not much else to do except make a complaint to the relevant authorities. Consumers can submit complaints about junk fees to the CFPB on their website at www.consumerfinance.gov/complaint or by calling 855-411-2372. That's 855-411-CFPB.
Sean Pyles: And then once you complain to the authorities, maybe take to social media to commiserate with folks and potentially dabble in some public shaming of the corporations that charge these fees.
Anna Helhoski: Yes, dabble away.
Sean Pyles: This episode was produced by Anna Helhoski and myself. We had editing help from Liz Weston. Kaely Monahan and I mixed our audio. And a big thank you to the folks on the NerdWallet copy desk for all their help.
Anna Helhoski: Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sean Pyles: And with that said, until next time, turn to the Nerds.
Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.