Using one fee to hide another


The following scenarios have a lot more in common than you might think:

– You decide to try an online grocery service, so you visit their website to get pricing info. Each delivery is only $4.99. Your time is worth way more than five bucks, so you buy the week’s groceries online.

– You arrive at a foreign airport and need to exchange some currency. You ask what their fees are, and they say it’s a flat rate of $3.50 per transaction. Sounds like a good deal, so you give them $100 USD to exchange.

So far, so good. But what happens next? In my experience, you’re in for a nasty surprise.

– Aside from the delivery fee, the online grocer marks up every item 20-50% higher than what a regular store charges.

– Separate from the service charge, the currency exchange tacks on several extra percentage points — in their favor — when calculating the exchange rate.

What’s going on here? These businesses are engaging in a form of bait and switch. They lure you in with the promise of a very reasonable, flat rate price. Then, since you’ve already agreed to what you think it’s going to cost, it’s much easier for them to sneak in more charges. In my examples, the companies do this by inflating the prices for the core goods and services, making a ton of extra money along the way.

How can you avoid getting caught in this trap? One approach is to check the total cost and compare it to the alternatives — before you mentally commit to doing business with a company. In a perfect world, these businesses would have to provide clear, upfront disclosures of the true cost of their products and services. But since that probably won’t happen anytime soon, we all need to be on the lookout for sneaky companies that hide one fee behind another.