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Understanding and Avoiding Junk Fees

Often described as charges that service providers or financial institutions add onto transactions at the last minute, “junk fees” are pervasive. Generally, if a charge is viewed by the public as unnecessarily high, unexpected, and without solid justification, it may be considered a junk fee.

What Are Junk Fees?

Defining junk fees is more of an art than a science, but they’re often considered to be fees that add little value to a transaction. For instance, if you weren’t told about the charge beforehand but upon payment you discover a “convenience” fee has been added to the bill, that’s probably considered a junk fee.

Junk fees, as a term, have been around for a while. You can find newspaper classified ads dating back to at least the 1970s that promise not to attach junk fees to a mortgage. But junk fees have been getting a lot of attention from policymakers lately, partly due to recent aggravation from the public over concert fees and more.

In recent months, the White House has been waging a battle against junk fees, making the argument that these charges make it challenging for consumers to comparison shop—and are unfair since many people who may be obligated to pay for a product or service are stuck paying whatever fees are imposed on them. President Joe Biden has urged federal agencies to do what they can to reduce junk fees across the economy.

Where Might You Encounter Junk Fees?

Some of the places you might find junk fees include:

• Travel costs: If you’re charged extra for your child to sit in an airline seat next to you or you pay for a resort fee that covers hotel amenities such as free Wi-Fi and access to the gym, you might consider it a junk fee.
• Concert tickets: This includes being charged an exorbitant fee, or several fees, for processing your tickets.
• Hospitals: In the health care space, unexpected junk fees are often called “surprise fees.” They may be for important services, but hospitals arguably don’t always do a good job of letting patients know what they’re going to be charged for.
• Banking: Consumers may consider overdraft fees junk fees, especially when the overdraft is minimal, such as a few dollars. Fortunately, many banks are eliminating overdraft fees.
• Mortgages: The CFPB has found instances in which mortgage lenders have charged late fees that are higher than what the late fee was stated it would be in the lending agreement. Additionally, consumers may find surprise fees tacked on during mortgage closing.
• Rentals: Consumers have accused landlords of charging excessive late fees as well as processing or administrative fees, convenience fees, and insurance fees.
• Payday loans and auto title loans: The junk fees in this space can add up, but one particularly egregious fee stands out: People who have taken out auto title loans and been unable to pay them back have been charged fees to retrieve personal property from repossessed vehicles.

How Can You Avoid Junk Fees?

When you add up junk fees you may have paid over time, it can be discouraging. But you can avoid or at least minimize future junk fees with a few strategies.

• Remain vigilant when making a purchase: Before signing contracts for loans, read the fine print. When you’re about to book a hotel room or an airline, take a close look at what you’re being charged for. You can obviously expect taxes to be added to an advertised price, but if fees are tacked on, and if they seem unreasonable, you may want to shop elsewhere.
• Stay vigilant even after your purchase is complete: Read receipts and itemized bills after you pay for a service. If you don’t, you might miss an unfair fee—and then will have no chance of getting your money back.
• Address a complaint about the charge to customer service: If you see an unfair fee, talk to the customer service representative and explain why you think it was out of bounds. They may waive or refund it. If that doesn’t work, escalate and ask to talk to the manager or supervisor. Maybe you’ll be out of luck, but you won’t get a refund on a junk fee if you don’t push for one.

What’s Being Done About Junk Fees?

The federal government has been on a campaign in recent months to reduce junk fees. The CFPB, in particular, is in the midst of an initiative to reduce what it calls exploitative junk fees. The U.S. Department of Transportation (DOT) has also been trying to eliminate some junk fees, recently sending a proposal to Congress to end some of the extra costs imposed when families try to sit together on a flight.

DOT also recently debuted an online fee-free family seating dashboard allowing passengers to easily see what airlines will let a child 13 and under sit next to an accompanying adult with no extra expense—and what airlines still may charge you.

The U.S. Department of Housing and Urban Development recently sent an open letter to landlords and apartment managers as well as states and local governments to adopt policies to limit junk fees in rental housing.

The pressure may help eventually reduce some junk fees. Some big banks, for instance, have either gotten rid of overdraft fees altogether or modified their rules, such as giving consumers an extra day to make their account current before they’re charged an overdraft fee.

The Bottom Line

In some ways, watching out for junk fees is just part of keeping good financial habits. For instance, it’s important to budget carefully and maintain a healthy credit score and monitor your credit. You can track your credit for free through Experian.

Even if junk fees didn’t exist, it would make smart financial sense to study what you’re paying for and to at least glance at your receipt afterwards. Still, as long as junk fees do exist, it will pay off to be on the lookout for them—and to protest vigorously if you feel that you are being ripped off.

For any mortgage-related needs, feel free to call O1ne Mortgage at 213-732-3074. We’re here to help you navigate the complexities of mortgages with confidence and ease.

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