What are junk fees and how can you avoid them?

Take these steps to avoid the extra costs that push up your total spending and eat into your hard-earned money

Benjamin Franklin on the $100 bill
Americans have likely paid 'tens of billions of dollars in junk fees over the years'
(Image credit: Viorika / Getty Images)

President Joe Biden is on a mission to get rid of junk fees, and if he's successful, that could be very good news for Americans' wallets. USA Today reported that Americans have likely paid "tens of billions of dollars in 'junk fees' over the years," a category that includes everything from extra charges tacked on by ticket sellers to convenience fees for paying a bill over the phone.

Once you're aware of them, you'll see junk fees in a plethora of places, pushing up your total costs and eating into your hard-earned money. While we wait to see if Biden's efforts to eradicate junk fees are successful, there are also steps you can take to avoid these pesky extra costs.

What constitutes a junk fee?

Like the category of junk fees itself, the definition of the term is kind of loose. Here's how Bankrate defines them: "The term 'junk fees' can be applied to a broad range of charges that may be unexpected by consumers and not clearly explained by the financial institution or other service provider that imposes them."

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Per the Consumer Financial Protection Bureau (CFPB), junk fees are often charged "on top of the upfront price," which can make it "difficult or impossible to comparison-shop based on actual cost." The Balance provides a helpful example of this dynamic that may, unfortunately, sound pretty familiar: "When you book a hotel room, you're probably quoted a nightly charge for the hotel room. But some hotels will add on daily 'resort fees' and, in some cases, parking fees that weren't included in their original estimates." This can leave you with a bill that's a good bit higher than you were expecting.

For a more concrete understanding of junk fees, these are some common examples:

  • Overdraft or insufficient funds fees
  • Late payment fees
  • Add-on or unadvertised prepaid card fees
  • Convenience fees for bill payments, transfers or foreign transactions
  • Closing costs and homebuying fees
  • Student loan servicing fees
  • Document preparation fees
  • Service charges for event tickets
  • Resort fees charged by hotels
  • Airline family seating fees
  • Termination fees for internet or phone service

How much can they cost?

It can depend. Per the CFPB, overdraft and nonsufficient funds fees typically run anywhere from $30 to $35 per time. Foreign transaction fees, meanwhile, average between 1% and 3% of the value of your purchase, according to CBS News. Credit card late fees can run as high as $41 per missed payment. And the average mortgage closing costs for a single-family home in 2021, according to Bankrate, was $6,905 including taxes.

What does seem clear is that a profit is being made from these fees. According to the CFPB, bank revenue from overdraft and nonsufficient funds fees was over $15 billion in 2019, while credit card issuers raked in $23.6 billion in fees, $14 billion of which was from late fees.

Is there anything being done to crack down on them?

In June, Biden announced that "ticketing giants including Live Nation, Ticketmaster and SeatGeek agreed to publish all-in ticket prices to make it easier for customers to compare prices, instead of adding surprise charges at the end of the transaction," per USA Today. And then in July, Biden said that three rental housing platforms — AffordableHousing.com, Apartments.com and Zillow — had committed to "show total costs for rental units up front," Nerdwallet reported. There are further policy proposals in place targeting industries like hotels, airlines, and cable, internet and mobile phone companies.

States are also passing new laws to quash rental-housing-related junk fees, and the CFPB and Federal Trade Commission have been clamping down recently to punish habits of deceptive pricing and encourage greater transparency.

What can you do to avoid paying junk fees?

Even with all of these larger efforts going on, one of the best ways to steer clear of junk fees is to take action yourself. These are some ways to skip out on junk fees:

  • Shop around: Take your business to places that aren't charging these costs. For instance, you might opt for a checking account with a bank that doesn't charge monthly service fees, overdraft fees or out-of-network ATM fees. When booking a hotel, look for one that doesn't charge resort fees, and don't hesitate to call the hotel to ask about the fine print.
  • Negotiate: Ted Rossman, a senior industry analyst at Bankrate, told USA Today that sometimes you can, for example, ask a hotel to remove its resort fee "if you ask nicely, especially if you don't plan to take advantage of those extras." For mortgage closing costs, you might be able to negotiate to lower them or get a portion covered by the home's seller, according to Bankrate.
  • Be proactive: Avoid taking actions that trigger junk fees (though this is understandably sometimes easier said than done). Pay your credit card bill on time to avoid late fees, and keep consistent tabs on your checking account balance to avoid an overdraft or insufficient funds fee.

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week.

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Becca Stanek

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as the managing editor for investing and savings content at LendingTree and an editor at SmartAsset. Prior to that, she was a staff writer at The Week. She's freelanced for publications including SoFi, Forbes, LendingTree, Finance of America Mortgage, and Policygenius while she earns her MFA in creative writing from Queens University in Charlotte. She currently lives in Valatie, New York.