What Is a Junk Fee?

Junk fees can include surcharges you pay on credit cards, bills, loans, air travel, hotel rooms and event tickets.
Anna Helhoski
By Anna Helhoski 
Edited by Rick VanderKnyff

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Update on July 19: The Biden administration announced on July 19 that it would crack down on rental junk fees. The biggest “crackdown” being commitments from rental housing platforms including Zillow, Apartments.com and AffordableHousing.com to provide total, upfront cost information on rental properties. Mandatory fees on top of rent for things like mail sorting and trash collection can cost consumers hundreds of dollars, the administration said.

The Biden administration announcement also included findings from the Department of Housing and Urban Development (HUD) on specific types of fees attached to rentals and policy recommendations, as well as legislative actions that specific states are taking to address rental housing fees. More details below.

Junk fees are pesky at best, expensive at worst and usually a surprise to consumers. They can include the surcharges you pay on credit cards, bills, loans, air travel, hotel rooms and event tickets.

These are some of the most common types of junk fees, as defined by the Consumer Financial Protection Bureau, or CFPB:

  • Fees for overdraft or nonsufficient funds. The average cost of these fees is between $30 and $35, the CFPB says.

  • Late fees for not paying a bill on time. Nearly 60% of all fees charged by credit card issuers in 2019 came from late fees alone, according to the CFPB.

  • Convenience fees. Companies charge these fees to accept bill payments online or over the phone, transfer payments or conduct foreign transactions.

  • Prepaid card fees. Add-on or unadvertised costs to use prepaid cards. These cards provide a critical service for unbanked individuals, according to the CFPB.

  • Closing costs and homebuying fees. Added costs associated with closing on a home, including document preparation or title insurance, can cut into household equity. It may even be a barrier to homeownership, according to the CFPB.

These fees drive up overall costs for consumers and make it more difficult to do comparison shopping, according to a fact sheet released by the White House in March. In addition, fees at the back end of a transaction or those hidden in fine print distort the total price for consumers. You see this tactic with “service fees” for event ticketing or “resort fees” on hotel bills.

Junk fees are found across most financial services. For example, a CFPB report on March 8 detailed unlawful junk fees in several loan servicing markets, including auto loans, mortgages, student loans and payday loans. Some of those illegal fees include:

  • Auto loan servicing. Fake and excessive late fees, inflated estimated repossession fees, excessive processing fees and kickback payments.

  • Mortgage loan servicing. Excessive late fees, fees for unnecessary property inspections, fake private mortgage insurance premium charges and failure to adhere to Department of Housing and Urban Development, or HUD, rules that protected homeowners from late charges, fees and penalties.

  • Payday and title lending. Vehicle repossession fees, property retrieval fees and vehicles being repossessed with fees despite prior payment agreements with borrowers.

  • Student loan servicing. Late fees and interest even after payments were made on time, usually when servicers erroneously and temporarily allowed payments by credit card.

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Efforts to combat hidden and junk fees

Event and travel fees will be more transparent

On June 15, President Joe Biden announced that a group of event ticketing and travel companies will commit to all-in pricing. This would get rid of the “hidden” aspect of hidden fees, but does not eliminate fees altogether. Those companies include Ticketmaster (owned by Live Nation), SeatGeek, xBk, Airbnb, the Pablo Center at the Confluence, TickPick, DICE, and the Newport Festivals Foundation. Some of these companies — Airbnb, TickPick and DICE — have already changed their policies to allow consumers to see total costs up front. But others have made new pledges:

  • Live Nation is committing to providing upfront all-in pricing in September. That includes Ticketmaster events, as well. 

  • SeatGeek, a primary and secondary ticketing platform, plans to roll out all-in pricing this summer. 

  • xBx, a venue in Iowa that also sits on the board for the National Independent Venue Association, plans to introduce all-in pricing, as well.

What’s the problem with rental junk fees?

In a July 19 report from The Department of Housing and Urban Development (HUD), it said the fees that renters tend to face add up quickly. Application fees, for example, range from $50 to several hundred dollars. These fees are intended to cover the cost of background checks. These fees are particularly burdensome in tight markets because renters tend to submit multiple applications, according to the report. And the fees disproportionately burden Black and Hispanic renters, as well as low-income households with housing vouchers, who tend to submit more applications than white renters, HUD said. Once a renter signs a lease they may end up paying a monthly fee that is higher than the rent price due to hidden or junk fees, according to the report.

Rental housing platforms commit to price transparency

On July 19, the Biden Administration announced that three rental housing platforms will show total costs for rental units up front. The companies that are committing to price transparency include:

  • Zillow is launching a “Cost of Renting Summary” on all active apartment listings. The tool will include all monthly costs and one-time costs. 

  • Apartments.com will launch a new calculator this year that will determine the all-in price of rental units including up-front cost and recurring monthly fees. 

  • AffordableHousing.com will launch a “Trusted Owner” badge that identifies owners that have a history of committing to reasonable fee limits, not charging junk fees and providing full fee disclosures. It also will require owners to disclose all refundable and nonrefundable costs up front in listings. 

How states are combatting rental housing junk fees

Multiple states are cracking down on junk fees in rental housing by enacting new laws including:

Colorado: House Bill 1099 allows prospective renters to reuse rental applications for up to 30 days with no additional fees. And House Bill 1095 limits fees to tenants during evictions.

Connecticut: Senate Bill 998 bans landlords from charging prospective renters a fee for processing, reviewing or accepting a rental application. It also limits tenant screening reports to $50, bans move-in and move-out fees and prohibits late fees related to certain utility payments charged by the landlord. 

Maine: Legislative Document 691 prohibits a landlord from charging a fee to submit a rental application in excess of the cost of a background check or credit check. Landlords also can’t charge a screening fee more than once a year. 

Minnesota: Senate File 2909 requires landlords to display the total monthly payment and all requisite fees in ads and on the first page of any lease agreement. 

Rhode Island: House Bill 6087 limits rental application fees beyond the cost of background or credit checks.

Two other states have laws pending:

California: State senate passed Senate Bill 611 that requires landlords to disclose monthly rent rates including any fees, deposits and charges. It also prohibits certain fees like those tacked onto payment by check. It also prohibits landlords from charging security from a service member unless they have poor credit history or a history of damage to rental property. 

Montana: State senate passed Senate Bill 320 requiring landlords to refund application fees to any unsuccessful rental applicants above the costs of a background check or credit report. The law also requires landlords to only charge application fees to cover the cost of a background check or credit report. 

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What else is being done to curb junk fees?

Here are some of the recent actions taken to cut down on junk fees:

  • On July 11, the CFPB ordered Bank of America to pay more than $100 million to Bank of America customers. It said Bank of America was systematically double-dipping on insufficient fund account fees; withholding reward bonuses it promised to credit card customers; and misappropriating sensitive, personal information to open accounts without customer authorization.  

  • On June 21, the Federal Trade Commission took action against Amazon.com, charging that Amazon tricked customers into enrolling in Amazon Prime through “manipulative, coercive or deceptive user interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically-renewing Prime subscriptions.” It also charges that Amazon knowingly made the cancellation process for Prime subscribers more complicated. 

  • In February, the CFPB announced a proposed rule to curb excessive late fees on credit cards that could save consumers up to an estimated $9 billion per year. The CFPB found credit card companies charge customers as much as $41 per missed payment; the proposed rule would lower that amount to a maximum of $8.

  • On Feb. 1, Department of Transportation Secretary Pete Buttigieg said the DOT would launch a dashboard displaying which airlines guarantee family seating. And in March, the department submitted a rule to Congress requiring airlines to provide fee-free family seating that allows a parent and child to sit together.

  • In November 2022, the Federal Communications Commission, or FCC, adopted a rule that requires cable and internet providers to list fees and services upfront in a consumer-friendly way. The FCC says this would allow consumers to compare prices between providers more easily.

Junk Fee Prevention Act

The Junk Fee Prevention Act, introduced on March 22 by Sens. Richard Blumenthal, D-Conn., and Sheldon Whitehouse, D-R.I., aims to eliminate hidden and unnecessary fees and require the full price of services to be provided upfront rather than at the point of sale. In addition, the bill would allow the Federal Trade Commission, or FTC, and the FCC to issue and enforce new rules.

The act was introduced after President Joe Biden’s State of the Union address on Feb. 7, in which he said his administration would take on junk fees. Biden called on Congress to pass the act, which had not been formally introduced.

“Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in,” Biden said in his address. “They add up to hundreds of dollars a month. They make it harder for you to pay the bills or afford that family trip. I know how unfair it feels when a company overcharges you and gets away with it. Not anymore.”

Learn more below about the policy proposal for fees charged by hotels, event ticket sellers, communication services and airlines.

• Require clear and conspicuous disclosure of the entire cost of a good or service, including any mandatory fees.

• Bar excessive or deceptive mandatory fees for any good or service. It would also give the FTC rulemaking power to decide when fees are excessive and to enforce any rulemaking.

• Require ticket companies to disclose publicly — no less than 72 hours before a public sale — the total number of tickets offered for sale at a given event. It would also prevent speculative ticketing in which a seller doesn’t have a ticket at the time of sale but sells it anyway.

• Require clear and conspicuous disclosure of guarantees or refunds before the completion of any transaction.

• End early termination fees. The FCC would have rulemaking power in this case.

• Require mandatory fees to be disclosed in all mandatory prices.

• Require airlines to provide children 13 or younger a seat next to a family member without a fee.