Under the Median: How to Recognize and Reduce Surcharges and Convenience Fees

This is hard to admit, but I actually made the EXACT mistake that I tell you to avoid. For years now, I have been paying extra for our life insurance and I didn't even realize that I was doing it!

How did I get charged this fee and not know it?

Long story short, I recently had to deal with a couple of questions on our life insurance, which we pay quarterly. A few years ago, my husband, Larry, had called to ask if we could be moved to a yearly payment. The representative he talked to gave him misinformation. They told him that it must be paid quarterly and that there was no discount for paying it once a year.

However, when I called this week the lady on the other end of the phone asked, "Is there anything else I can help you with, today?" I answered, "Well, I'd love to pay these policies yearly, but I understand that that is not possible." She was stunned! "Yes, it is!" She immediately offered to change the two policies to yearly and I am now saving $60 a year!

This whole experience made me ponder convenience fees and surcharges. Although the two terms are often used interchangeably, they are very different. I had to do a bit of digging and more than a little research to get them straight in my head. But, I'm happy to pass on my findings to you, along with some tips for avoiding paying more than you need to for your bills, be they monthly or sporadic.

What are Convenience Fees?

A convenience fee is a surcharge that a business or credit card tacks on to your existing payment. It is used when your method of payment or frequency of payment is not one which is generally used or preferred by that institution. It is also added when you are not present at the time of the transaction, buying over the phone or on the internet.

For example, if you pay your utility bill on-line with a check or credit card, then you will undoubtedly pay a convenience fee. Most people either mail in their payment or have it automatically deducted from their checking account each month. Unless customers are in a time crunch to get the bill paid on time, they don't conduct this transaction over the phone or on-line. Additionally, credit card companies generally charge merchants a fee each time they process a payment.Therefore, the utility company justifies imposing a convenience fee on the user.

What is a surcharge?

According to Investopedia.com, a surcharge is, "an extra fee, charge, or tax that is added on to the cost of a good or service, beyond the initially quoted price. Often a surcharge is added to an existing tax and is not included in the stated price of the good or service."

These fees can masquerade under a number of different names, depending on the service or item you are purchasing.

Here are some examples:

Ticketmaster is notorious for their fees, often adding $10 to $20 to the price of your ticket purchase! In addition to the standard "convenience fee" notation, you may see thing like, "facility charge" and "shipping or mailing charge"

If you pay your auto, home, or life insurance more than once a year, you will be adding an "office" or "administration fee" to an already large bill!

Many businesses are beginning to add convenience fees if you ask for paper billing. Our internet company charges you an additional $5 for paper billing and $5.00 for not electing to auto-pay.

Hotels are known to tack a huge variety of convenience fees onto your bill, ranging from line items like: an internet surcharge, extra towels, parking fees, groundskeeping fees, resort fees, and even telephone charges for local calls.

Airlines and airports may charge a "processing fee", "baggage fee" or "parking fee".

Go to an ATM machine not associated directly with your local banking institution and you will pay one or more "transaction" fees.

On-line merchants can legally add "shipping and handling" or "service fees"to your bill.

These charges can vary wildly. Some are a flat fee, while others use a mathematical formula, representing a percentage of your total bill. Sadly, most of the time customers do not carefully examine each line of their bills to check for fees. We assume that we should look at the "amount due" column and simply pay that amount.
You should not! Here's why!

Tips for avoiding or lowering surcharge and convenience fees

1. Change the frequency.

For items like life, auto, and homeowners insurance, paying yearly will often net you a rebate or rate reduction. Read the fine print. You may need to pay the total on the "amount due" line and then the company will send you a check once your payment clears the bank or they may just allow you to take the appropriate amount off of the total before sending in your payment. If you have any questions, it is best to call for clarification before sending in your payment.

If you must wait for your rebate, be sure to keep the bill and all appropriate paperwork until you receive their check and it is cashed. Sometimes with large companies, "the left hand doesn't know what the right hand is doing." So, if you call customer service asking about your rebate check, you may get silence or confusion on the other end of the line. If you have all the paperwork handy, you can offer to scan and e-mail it to them or read it directly from the company correspondence. While you are on the phone, do be sure to jot down the operator's name, the date, and any notes which you take during the phone call.

We just took advantage of an offer just like this last month! We received our annual home and auto insurance bills in the mail and noticed that was an insert announcing a new company policy. If you paid the entire amount, the company would reduce your bill by 5%. Since we were already paying just once a year, we were delighted. We promptly paid and the kept the bill until we received the 5% rebate from the company in the mail.

2. Ask for the fees to be waived.

It never hurts to ask. We did and it paid off! When our internet provider explained that they add on an additional $5 monthly charge for sending a paper bill and another $5 if you don't opt for auto bill pay, we very nearly said, "no" to the salesman. Since the total bill is only $50 per month, those charges would have been a 20% surcharge! Recognizing that we were not going to pay $10 extra per month on a $50 bill, he had the charges waived. Yes, we got his offer in writing.

3. Make sure you are asking the correct person.

When you ask, if the answer they get makes no sense to you, don't be afraid to ask to talk to a supervisor. The answer didn't make any sense to me when Larry got that answer years ago and I didn't follow up on it by making another call myself. That was a mistake that cost me hundreds of dollars over the past few years!

4. Examine your bills closely!

Keep last month's bill to compare it to the one you just received in the mail. Go over it line-by-line so you can easily see if any new fees have been added. Call the company and ask if this is a convenience fee or a surcharge and how long you can expect to see it added to your bill. Some government regulatory agencies like water and sewer companies, will add fees for a short period of time to cover the costs of infrastructure upkeep. It helps to know how long the additional charge will last.

I once found an additional charge on my utility bill. I immediately called and asked about it. Although it turned out that this legitimate charge was a result of a misunderstanding on my part, the company gladly removed the charge from all future bills.

5. If possible, go in person.

In the case of tickets, if you are from out of town, but attending with a friend who lives near the concert venue, ask them if they could trek down to the box office or hotel during business hours and purchase the tickets in person.

With a hotel, if your local contact can go directly to your choice of hotel, you may be able to avoid paying third party fees from places like Hotels.com or Travelocity.com. But, be sure that you double check to be certain you are getting the best deal! Sometimes, even with the third-party convenience fees, going through an alternate provider is cheaper, because they deal in volume and are passing their discount on to you.

Don't forget to check local travel agencies too. It's their business to find you rockin' deals on your next vacation! They often have access to insider information on swanky hotels who really need guests, destination specials, and flights with ultra cheap seats.

6. Keep a log of all phone calls and e-mails.

Before you put your money on the line, compare prices!

Talk directly to the merchant in question if you can.

Get the name of the person to whom you are speaking.

Note the date and time that you called.

For hotels and airlines, compare the price of checking in or traveling on a Thursday or Sunday as compared to a Friday or Saturday. Weekends are premium times and more costly than weekdays.