Why hidden fees are a big deal

The result?  Those $5 and $10 charges really add up. Even with these limitations, Americans told us they lose $946 to sneaky fees every year, enough to stock a sizable retirement fund.  And when you add up all sneaky fee revenue, the total is simply massive.  According to the survey, corporate America’s take in the 10 industries surveyed was $45 billion.  To put that number in context, $45 billion is about equal to the amount of money stolen through the fastest-growing crime in the country, identity theft.  ID theft is such as epidemic that Presidential task forces have been formed to fight it. There are entire divisions of law enforcement officials being trained to stop it. There is an entire industry of companies that has grown up to prevent it.  I know of no single agency or company devoted to stopping the explosion of hidden fees, which cost our society just as much as identity theft.

Of course, the crime of hidden fees is not so dramatic.  There are no spectacular million-dollar diamond heists accomplished in the name of deceased CEOs.  Instead, hidden fees are a slow drip-drip-dripping out of Americans’ hard earned salaries.  Cell phone users, for example, reported to us that they pay about $5-$10 more a month — on average — than they expect to, thanks to sneaky fees.  That doesn’t sound like much, until you consider there are more than 200 million cell phones users in the U.S. alone.

Now perhaps you’ll think like I do, that that the proliferation of hidden fees — and not identity theft — is the fastest-growing white-collar crime in America.

For consumers making $45,000 or less a year, that $946 in hidden fees can mean one fewer vacation per year; or no evening classes for additional job training.  They can take a huge bite out of a family’s retirement savings.

And that number is conservative. For starters, to make the study manageable, we limited the survey to 10 likely culprits: cellular phones, credit cards, banks, airline travel, hotels, cable TV/satellite, home Internet access, retirement services, insurance, and groceries.

Remember, this $946 total is an average. So for every consumer who manages to exert Herculean effort and minimizes hidden fee expenses to a tidy $200 or $300, there’s another who pays nearly $2,000 a year. It also only represents the sneaky fee take among those 10 industries — obviously, other kinds of companies stick their customers with fees, too.

Finally, this $45 billion total — that’s just the sneaky fees consumers know about.  Others are surely lurking out there underneath mountainous monthly bills that busy consumers miss, and couldn’t reveal to us when asked. 

It’s easy to calculate sneaky fee estimates that are much higher.  Simply adding up analysts’ estimates of total fee income from credit card late fees, homeowners’ title insurance, wacky hotel resort fees, and the like, consumers lose well more than $100 billion a year to hidden surcharges. 

But the real total is probably even more than that — in 2004, Consumer Reports guessed it was around $216 billion annually.  Your family’s portion of that would average closer to $4,000 each year. 

GOTCHA!  Perhaps those mosquito bites are starting to itch. But I have yet to describe the biggest bite of all.

That $4,000 annual drain is nothing compared to what Gotcha Capitalism is doing to your retirement. In the biggest fee swindle ever invented, hidden fees — siphoned off in total silence by Wall Street — will force you to work four, five, even six year longer than you should.  They’re stealing roughly one-third of the money the average American has set aside for old-age.  And get this: The better the investor, the greater the penalty. Later in this book, I’ll show you how Wall Street fees can suck up fully 80 percent of the money a 20-year-old invests for retirement. Eighty percent!

Hidden fees are so drastic now that they may even be screwing with the national inflation rate.  Companies often don’t supply surcharges and fee data to the Bureau of Labor Statistics, so when it computes inflation rates, fees aren’t reflected. As a result, our national inflation rate is held artificially low.

Yes, hidden fees are a big deal.

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