Sneaky Fees: Hidden Charges Add Up for Tech Users

Helen Mickiewicz, a sharp-eyed T-Mobile customer in San Carlos, Calif., noticed something odd on her mobile phone bill earlier this year: A charge for $6.05 for something called a "regulatory fee." Curious, Mickiewicz read the fine print and found that T-Mobile levies the fee to compensate itself for collecting government-mandated taxes and fees related to her service.

Be clear: the $6.05 is not a tax. "T-Mobile is charging me $6.05 a month to collect taxes and fees of $4.30 a month. That's like Macy's charging me for collecting sales tax on something I bought," she told me.

That's what I call a sneaky fee. More and more companies, from airlines and cell phone providers to computer makers and cable TV providers, are separating all sorts of little charges from the basic cost of the service, in an effort to look cheaper than the competition. In many cases, the charges are so small you might not notice them. But they add up.

[ Broadband providers sell connection speeds using "up to" marketing tactics. Good luck determining your actual speed -- and don't bother looking to the FCC for help. See CIO.com's recent story, The Truth About Broadband Speeds. ]

How much does this consumer-unfriendly game cost you? Obviously it varies, but a research firm called the Ponemon Institute sent questionnaires to nearly 28,000 consumers and found that on average, sneaky fees cost each household about $920 a year. The survey was conducted in 2006; sneaky fees have almost certainly gone up since then.

Beating Sneaky Fees is Tough

"There are a lot of legal ways that companies offer what seems to be a good deal and (legally) add fees to lure consumers into what turns out to be a more expensive agreement than was advertised," says Michael Spinney, a Ponemon analyst. "It's sort of buyer beware."

Even well-informed consumers often strike out when they try to beat a sneaky fee. Mickiewicz contacted T-Mobile, the Federal Communications Commission and the California Public Utilities Commission--all to no avail. Particularly galling was a response by a well-meaning T-Mobile employee who told her that "everybody (all the phone companies) is doing it."

You should certainly let vendors know that fees like this don't incent you to be loyal to their brands. Another strategy is to avoid the fees in the first place--if possible.

I love baseball and attend a fair number of San Francisco Giants games every season. I'm going to the night home opener (fireworks!) and was going to buy my tickets online. If I want to sit in a pretty good seat, the Web site says it will cost me $42. However, there's a "convenience fee" of $7.50 per ticket. On top of that, there's a "handling charge" of $3.50 per order. So now my $42 seat has become a $53 seat, but the view isn't any better. Interestingly, the handling charge doesn't go away if I print the ticket myself. That's about as sneaky as you get.

I'll say one thing for the Giants. They more or less admit they are ripping you off. When you call customer service, a recorded announcement mentions the fees and says the company makes a profit on those fees. My solution: Go the ballpark on a lunch break and save the money.

Whether you going to a baseball game or a production of Othello, be careful to know how much the service fee is before you click purchase, and find out if there's an alternative. Many theaters, for example, will let you make a reservation over the phone and pick up your tickets at the box office. You're going to be at the theater anyway, so why pay extra to avoid a few minutes standing in line?

Sneaky Fees are Everywhere

When I read the Ponemon study, I was immediately struck by the ubiquitous nature of the sneaky fee. Eighty-seven percent of the respondents said they had been hit by a sneaky fee, and of those: 72 percent said a sneaky fee was charged to a cell phone bill; 68 percent to a credit card bill; 30 percent on a bank charge, including ATM fees.

Fewer people, just 14 percent, said they noticed a sneaky fee on a bill for home internet access.

But remember: Internet providers don't guarantee a particular speed. As I wrote last month, your Internet provider may advertise "lightning" downloads and uploads, but is careful to hedge the numbers with the sneaky phrase "up to," as in up to 3 Mbps. Want more speed? Pay for it.

Computer makers did their sneaky best to extract a few extra dollars from consumers last year by offering to send a free copy of Windows 7 to buyers who purchased a PC running Vista shortly before the launch of the new operating system. It was free, unless you noticed the fees for "shipping, handling, and fulfillment," which totaled $17.03 for Lenovo customers and a few dollars less for buyers of other brands. Now that's pretty darn sneaky.

San Francisco journalist Bill Snyder writes frequently about business and technology. He welcomes your comments and suggestions. Reach him at bill.snyder@sbcglobal.net.

This story, "Sneaky Fees: Hidden Charges Add Up for Tech Users" was originally published by CIO.

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