Consumers face a stealth tax in the form of junk fees, with these hidden charges amounting to a staggering $90 billion annually in the United States. That’s an average of over $650 per household yearly – a significant sum equivalent to nearly one-fifth of the average household’s entertainment budget. These fees are a pervasive problem that masks the actual cost of purchases.
The White House has recently published a report highlighting the industries that levy the maximum junk fees. Join us as we explore the report to identify the most common culprits draining your wallet.
Credit Card Late Payment Fees
Ticket size: $14.5 billion in 2022 (CFPB estimate)
Impact: These fees disproportionately affect low-income Americans and those with poor credit. They can rapidly accumulate, making it challenging for affected individuals to regain financial stability. Late fees contribute to the overall cost of credit, reducing consumers’ purchasing power. To address this issue, the Consumer Financial Protection Bureau (CFPB) has implemented regulations such as restrictions on excessive fees and mandatory grace periods.
Bank Overdraft and Non-Sufficient Funds Fees
Ticket size: $9.1 billion in 2022 (CFPB estimate)
Impact: These fees often target low-income individuals who rely heavily on checking accounts for bill payments and daily expenses. Overdraft fees can deplete accounts rapidly, leading to additional costs and financial hardship. This practice has been criticized for exploiting financial vulnerabilities.
Hotel Resort Fees
Ticket size: $3.3 billion in 2022 (American Hotel and Lodging Association, Nerdwallet)
Impact: These are daily charges added to a guest’s hotel bill to cover the cost of various amenities. These mandatory fees, often hidden or disclosed at the last minute, increase the overall cost of a hotel stay. While they fund amenities like pools and gyms, consumers often feel misled about the actual cost of their accommodation. This practice can deter budget-conscious travelers.
Airline Baggage and Change Fees
Ticket size: $8.3 billion in 2023 (Bureau of Transportation Statistics)
Impact: These fees have become a significant burden for air travelers, especially families or those with limited luggage space. The fees can incentivize passengers to pack lighter, potentially leading to discomfort or additional purchases. This revenue stream has allowed airlines to increase profits while reducing base ticket prices.
Cable Fees
Ticket size: $28 billion in 2019 (Consumer Reports estimate)
Impact: Cable subscribers face a variety of fees like equipment rental, regional sports fees, and broadcast TV fees, which inflate their overall costs. Broadcast fees for major distributors have risen by nearly 13% in 2024 compared to Q1 2023. This lack of transparency and rising costs contribute to consumer confusion and budget overruns.
To address this, the FCC mandates that cable and satellite TV providers disclose total subscription costs, including hidden fees, aiming to reduce surprise charges and empower informed consumer choices. Despite industry objections, the FCC’s decision marks a significant stride towards transparency in the cable industry.
Food Delivery Service Fees
Ticket size: $5 billion in 2021 (CEA estimate)
Impact: Delivery fees, service charges, and tip suggestions can significantly inflate the cost of ordering food online. These fees disproportionately affect urban residents and those with limited access to grocery stores or restaurants. As food delivery becomes increasingly popular, the financial burden on consumers grows. Food delivery apps and restaurants are notorious for junk fees. Consumers paid an estimated $5 billion in hidden delivery fees in 2021, while restaurants collected an additional $10.8 billion through mandatory service charges in 2023.
Restaurant Service Fees
Ticket size: $10.8 billion in 2023 (CEA estimate)
Impact: Mandatory service charges, often disguised as gratuity, have become common in restaurants. These fees can lead to confusion and frustration for customers, often resulting in higher-than-expected bills. While intended to support staff wages, these fees can also reduce the incentive for customers to tip generously.
Auto Dealer Fees
Ticket size: $3.4 billion (expected FTC estimate)
Impact: Hidden fees, such as destination charges, dealer fees, and document fees, can inflate the price of a new car. These fees are often non-negotiable, reducing consumer bargaining power. This practice can make car ownership less affordable, especially for first-time buyers. The Federal Trade Commission has finalized a rule targeting bait-and-switch tactics and hidden fees in the auto industry. This regulation is expected to save consumers over $3.4 billion annually and significantly reduce time spent on car shopping.
Apartment Application Fees
Ticket size: $276 million in 2023 (CEA estimate)
Impact: Non-refundable application fees can be a financial barrier for renters, especially those with limited income. These fees can add up quickly for individuals searching for multiple apartments, reducing their housing options. This practice can contribute to housing affordability challenges. Landlords and brokers often impose application fees that significantly exceed the cost of background checks. While some states have implemented regulations to curb this practice, the overall burden on renters is estimated at $276 million annually.
Event Ticket Fees
Ticket size: $7.14 billion in 2023 (CEA estimate)
Impact: Service fees, facility fees, and dynamic pricing can significantly increase the cost of concert, sports, and theater tickets. These fees make attending live events less accessible for average consumers, particularly for families or those on tight budgets. The practice can create resentment among fans and erode trust in the ticketing industry. The event ticketing industry has a notorious reputation for hidden fees. The Whitehouse report mentions that a leading ticket broker is estimated to have charged U.S. customers approximately $4.8 billion in hidden fees in 2023. Considering other significant players, the total industry-wide junk fee burden is $7.14 billion.
