What my $30 hamburger reveals about fees and how companies use them to jack up prices – Gist It

What my $30 hamburger reveals about fees and how companies use them to jack up prices

Increasingly, hidden fees on products and services are causing prices to spike, a phenomenon known as “stealth inflation”.

Breaking down the burger order: A seemingly inexpensive meal can double in price due to various added costs.
* An original meal total of $14.07 rose to $27.81 as a result of added delivery, service, and tip fees along with tax.

Point of view on fees: Companies are utilizing this strategy as a way of increasing prices without directly raising the initial cost.
* Jeff Galak, professor of marketing at Carnegie Mellon University’s Tepper School of Business, refers to the process as “fee-flation.”
* Fees are not typically considered during the buying process, and consumers often fail to notice these hidden costs until it’s too late.

Government action: In response to the increase in these “junk fees”, the federal government has begun cracking down on fee-charging industries.
* Americans spend over $65 billion on fees annually, according to White House estimates.
* Recent government actions include a $150 million fine on Bank of America for abusive overdraft fees and pressure on airlines to drop rebooking fees.

Justifying fees: Some businesses view fees as a necessary method to cover operating costs and stay afloat.
* Troy Reding, owner of Rock Elm Tavern, added a 3% “Wellness Fee” to customers’ bills to afford full benefits for his employees.

Despite justifications, many believe the situation with fees has spiraled out of control. While some consumers may cancel orders upon noticing the extra charges, the reality is that many will pay the inflated prices due to the complicated nature of these “stealth” costs.

View original article on NPR

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July 27, 2023

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