Nobody likes being nickel-and-dimed. Yet, many businesses do exactly that to their customers by charging junk fees. In other words, they bill their customers extra for goods and services without providing additional value in return.
When an airline charges you a fee to sit with your family, that’s a junk fee. When a telecommunications corporation charges you to terminate your account, that’s also a junk fee. When a ticketing agent levies a service charge on your seat for a concert, you guessed it: that’s a junk fee.
Unfortunately, I could list many more examples. According to CBS News, junk fees cost Americans $29 billion a year in total.
The problem of junk fees
Junk fees often come as a surprise to consumers, since they usually aren’t indicated before the moment of purchase. At that point, the customer may have invested so much time and become so attached to the purchase that they won’t want to continue shopping around and will spring for the higher price. Some consumers have no choice but to accept these fees, since competition may be lacking or they may already be locked into a commitment with that company.
While corporations sometimes design junk fees to look like a government tax, they usually keep the additional funds themselves. Most of the time, they call these charges things like “service fee,” “booking fee,” or “admin fee.” These extra costs can be confusing and frustrating, especially for first-time clients who were not previously aware of them.
Junk fees also hinder informed purchasing decisions. According to the Consumer Financial Protection Bureau, “When companies charge excessive fees on top of the upfront price, it’s difficult or impossible to comparison shop based on actual cost.”
A different business philosophy
Junk fees add nothing for the client other than a sour taste in their mouth at the time of payment. Businesses that charge them seem to believe that increasing profits by small amounts is worth customers’ disapproval. Given the proliferation of these fees in recent years, it seems many businesses in a wide range of industries have adopted this logic.
However, there is another possible philosophy companies could adopt: integrity. Some businesses believe that charging extra for services that should already be covered is unnecessary and unfair. They find it dishonest to lead people to believe they will receive certain services or goods for a price and then change it at the last minute.
Similarly, some companies want consumers to have the best experience possible and won’t burden clients with charges they can’t control. They keep things simple by offering a clear price list with no hidden fees or surprises at checkout.
In my experience, this honest, transparent approach leads to success because customers are happier overall, meaning they will be more likely to refer the product or service to their friends and family members. This, in turn, leads others to become customers themselves.
Eliminating junk fees is popular
A recent Morning Consult survey has shown that 75 percent of Americans support measures to eliminate and reduce junk fees. Even Americans with the highest incomes oppose these extraneous charges. The bracket that was most likely to support reducing service fees and eliminating early termination fees was made up of those with a household income of $100,000 or more.
At SamBoat, our mission is to make boating more accessible to everyone. We only charge for services we actually provide, such as open-bar or birthday-party packages in which drinks, food, and other things are put on the boat for clients to enjoy. As a result, our listings are 10 percent cheaper on average than similar listings on other yacht rental marketplaces. Charging an extra fee would present customers with another hurdle, which is the opposite of what we want to accomplish. That’s why we focus on delivering real value instead of charging junk fees.
It’s important for customers to know exactly what they will get for their money. By giving people transparency, quality, and lower prices, our business model succeeds without needing to cheat. For any small business like ours, people always come first. In our experience, this common-sense approach has been better for our profit margin than any junk fee could be.
