Every year, Americans spend millions of dollars on nothing.
Thanks to fine print, penalties and questionable surcharges, the average consumer can expect to shell out upwards of $1,000 a year on fees that are layered atop what they already pay for cable television, cellphones, travel and financial services.
Overdraft fee income has evolved into a huge profit center for banks, who will take in an estimated $27 billion in fees this year. An additional $20 billion will be collected for credit card penalties, a number that will undoubtedly increase as issuers including Bank of America(BAC Quote) and Citigroup(C Quote) start charging customers who fail to carry over a monthly balance.
According to a national survey by Moebs Services, an Illinois-based research firm, the median overdraft fee on consumer accounts increased 4% to $26 per incident this year. Wall Street banks had a median penalty of $35 per overdraft.
"This is the first time in our 22-year history of collecting this data that we have seen overdraft fees increase during a recession," says Mike Moebs, chief executive of Moebs Services.
Moebs, which provides data to the Federal Reserve and the U.S. Government Accountability Office, found that overdraft revenue outweighed net income at 45% of banks and credit unions.
Even though Bank of America, JPMorgan Chase (JPM Quote) and Wachovia (now part of Wells Fargo(WFC Quote)) have rolled out new overdraft policies they say are more consumer-friendly, some say the move may be too little, too late as far.
On Capitol Hill, Senator Chris Dodd, a Democrat of Connecticut, has spearheaded the Fairness and Accountability in Receiving Overdraft Coverage Act. Further protections could come from the creation of a Consumer Financial Safety Commission and actions by the FDIC.
An argument can be made that these banks are doing nothing wrong. After all, if you don't bounce a check or withdraw more with your ATM card than you have in an account, you won't be penalized. But other fees are more difficult to spot or avoid, no matter how good a customer you are.
Cable and Internet provider Comcast(CMCSA Quote) is just one of many companies finding ways to wring added profit from the mere act of paying your bill. Though online payments are free, a $2 charge is assessed for paying via an automated phone system. The fee jumps to $4.95 if a live operator is needed.
Other companies have also add similar pay-to-pay programs. Dell(DELL Quote), for example, charges nearly $10 to allow online payments made on the due date to be credited on that day.
Wireless carrier T-Mobile, a subsidiary of Deutsche Telekom(DT Quote), recently tried to impose a monthly fee of $1.50 for mailing bills. The fee jumped to $3.50 if you wanted an itemized list of calls, something Verizon Communications(VZ Quote) and AT&T(T Quote) customers already pay an extra $2 a month for. While environmental activists might have applauded the effort to reduce paper consumption, consumer backlash and threats from various government officials prompted a hasty retreat from the plan.
Comcast also plans to increase the rental fee for your cable modem from $3 to $5.This amounts to $60 a year for an item a savvy shopper could buy for about the same price at many retailers. Given that most customers won't change modems for two, even three, years, the price tag is no bargain. If you use your own modem, Comcast can charge you for some service calls.
Given that Comcast has roughly 45.6 million in customers for its TV, Internet and phone services, it's not hard to see how a buck or two, here and there, can be a massive boost to the bottom line.
In almost every industry, there's an increasing slate of fees to contend with. Hotels routinely charge upwards $20 for access to their parking lots, pools and gym equipment -- amenities previously considered part of the cost of staying. And besides the exorbitant charges for items you take from the mini-bar, be prepared for a "restocking" fee of as much as $10.
Rent a car and you could get hit with an 11% surcharge for "Airport Concession Recovery." Also look for such itemized items as "tires" and "oil" to add on a buck or two.
Shipping costs are becoming new revenue sources. Delivery charges for items you order, including those "free" bonus gifts infomercials tout, often exceed the cost of using UPS(UPS Quote), FedEx(FDX Quote) or the U.S. Postal Service.
Some colleges have instituted higher surcharges for amenities. PCWorld recently reported that the University of California, Santa Cruz, has raised its "seismic safety fee" to $40 a term. This added cost is designed to help the school be better prepared for earthquakes.
Financial services are often hotbeds of unexplained or exaggerated fees. On Monday, the Supreme Court is expected to hear Jones versus Harris Associates, a case in which the plaintiffs claim that mutual fund companies charge individual customers higher fees than institutional investors that manage 401(k) plans and pensions.