hidden fees

Hidden Fees, Hidden Emotions

Getting rid of “junk fees” and increasing transparency in pricing has been in the spotlight in recent months. Yet hidden fees in many of the services we purchase have been around for a long time. There’s a reason that “read the fine print” is a timeless bit of advice.

Why don’t the sellers of services just transparently list one price that includes all fees? The reason is mostly psychological. Sellers often want to attract customers by appearing to offer the lowest price, even when added fees make the final cost the same as or even higher than that of their competitors.

Suppose one airline offers a $600 fare, with no added fees. Another advertises a price of $450, which when fees for everything from seat selection to checking a bag are added, comes to $670. Buyers are likely to focus on the lowest advertised price of $450, which appears to be the best deal. It is easier and faster for our emotional limbic brain to make a decision using the cognitive bias of anchoring than it is for us to slow down and use the cognitive brain to consider all the applicable fees and compare the actual costs.

In most cases it’s completely legal for businesses to advertise lower prices and charge add-on fees. Proponents of this would argue that it gives consumers the opportunity to only pay for the services they want. The issue for critics appears to be, not whether it is a good thing to offer consumers choices, but the level of transparency about the fees.

This brings us to another emotional factor around hidden fees. What do you do, in the middle of a transaction or after you have received the bill for a service, when you are surprised by extra fees? For example, since the pandemic, I’ve seen more and more restaurants adding fees of around three to five percent to the bill. It’s in addition to any tip and is creatively called anything from a service fee to a health fee or an inflation adjustment fee. And in many cases, customers are not informed of this fee in advance and only find out about it when they get the check. If you’re like me, your reaction will be annoyance. What should you do?

The obvious answer is, first, examine the bill before you pay it instead of just handing over your credit card and, second, question the fee and the lack of transparency about it. There are several emotional reasons why we may not do either.

Even reviewing the bill can be fraught with money scripts and emotions. You’re at dinner, maybe with friends, enjoying the conversation, and you don’t want to break the flow. It’s easier just to pull out the credit card, give it to the server, and trust that everything’s accurate. Or you may have a money script that scrutinizing the bill would offend the server. You may be afraid your guests would see you as penny-pinching or assume you’re strapped financially. You may want to avoid the conflict of asking for the bill to be adjusted and perhaps needing to negotiate with a manager. In the end, you may decide addressing the surprise fee isn’t worth the hassle, so you just pay the extra charge and walk away feeling resentful.

In cases like this, taking care of ourselves financially is the art of being present. Being aware of our money scripts, being aware of the emotions that surround them, and then at some point in time, asking them to stand aside while you focus on the reality of the bill in front of you. This is how we can create the space to be fully focused on the charges that we’re agreeing to pay and to make a cleaner decision that is in our own best interest.

Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.

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