Biden wants to end junk fees, but how did they start in the first place?
BOSTON -- In his State of the Union address, President Joe Biden called to end what he calls "junk fees." They are those pesky add-ons at the end of purchases of airline tickets, concert tickets, or resort stays.
The proposal is not the first of its kind. A paper published by the National Bureau of Economic Research says credit card fee regulations in 2009 saved consumers $11.9 billion. Economists say these fees hurt a consumer's ability to find the best deal. Some companies may show a lower base fee to get a buyer committed to the purchase before adding the junk fees at the end. The lack of transparency up front can hinder true cost comparisons. One ticket may look cheaper than another until you get to the fees at the end.
"As you become more committed to that purchase, we start to push fees to you, and you are then more likely to accept them," tells Frederic Brunel, a marketing professor at Boston University, "Once upon a time, when you bought an airline ticket, it came with seat assignment and baggage fees included and meal and all these other things. That is no longer."
Brunel says the dividing up of these fees has actually reduced average flight prices over the last 30 years. He says the idea is designed to allow consumers to purchase add-ons they want while leaving out charges for services they do not need. For him, the issue is transparency. He says too many of these fees only show at the end of the purchase.
"Markets will be competitive only if there is transparency," believes Brunel.
He also has an issue with "junk fees" that come for services you may not even use.
"You show up to the hotel, and you find there is an extra charge per guest per night for the resort fee. You have no intention of going to the swimming pool or the beach because you're there for the business trip," describes Brunel.
The Better Business Bureau suggests customers read the fine print at the beginning of a transaction. There may be an asterisk leading to additional fees. The BBB also says some cities require hotels to charge resort fees.
"A lot of hotels have to charge taxes and fees based off the municipality they are in. In Las Vegas, they charge resort fees, so it's important to be arming consumers with all of that information," tells Melanie McGovern, spokesperson for the Better Business Bureau.