Unreasonable fees are the financial equivalent of a cold slap in the face. Here's how to steer clear of them.
Unreasonable fees are more than just a drain on your finances. They’re insulting, the financial equivalent of a cold slap in the face. Such fees share three qualities:
- They’re unreasonable.
- You get little or nothing in return.
- They’re ridiculously overpriced.
Following are 10 of the world’s most insulting fees, along with ways to avoid them.
1. Checked baggage fees
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Our first three unreasonable fees all have to do with airlines. Major airlines often charge baggage fees — maybe $25 to check one suitcase, a lot more if it’s oversized, overweight or both.
This fee didn’t exist until recent years and for good reason: The price of a plane ticket should obviously include luggage. Isn’t that an integral part of traveling long distances? Other travel-related services — buses, trains, hotels or rental cars — don’t charge for luggage. This isn’t a fee, it’s a sophomoric attempt to disguise a higher price.
Fortunately, Southwest and JetBlue airlines don’t charge this insulting fee for the first bag. Southwest will even let you check two bags free.
Check this chart or one like it to see how much your airline is charging. Some airlines also allow you to avoid baggage fees by using their branded credit cards. For more ideas, see “10 Tips to Save on Baggage Fees.”
2. Carry-on baggage fees
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At least when you pay to check a bag, there’s a service involved. Someone has to load it, unload it and make sure it gets safely back into your hands. Charging for a carry-on bag is charging for nothing whatsoever. Nobody is touching your bag but you, making this fee indefensible. Airlines that charge this fee include:
- Allegiant Air
- Frontier Airlines
- Spirit Airlines
Try to avoid airlines that charge such fees unless you get a deal so good that it compensates for the cost. Also, check with UPS or another freight carrier about shipping your bags instead.
3. Lap fees/pet fees
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If you have a child younger than 2, it’s typically free to carry them on your lap for a domestic flight. Leave the country, however, and you might pay a “lap fee” of 10 percent of the ticket cost. You pay the fee despite the fact that the airline is performing no service, giving no extra room and no assistance — nothing.
Expect the same when you’re flying with Fido. Bring a pet with you into the cabin, and you’ll pay up to $125 each way. To add insult to injury, the pet carrier counts as a carry-on. Again, the airline is doing nothing but collecting a hefty fee.
To avoid such fees, check with the airline before you book the ticket to see if the carrier will charge you.
4. Rental car collision damage waiver fees
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This type of waiver makes the list of insulting fees because it’s overpriced: It can cost $25 a day. Add extra liability coverage, and you could be paying $40. That’s the equivalent of a car policy that costs $14,600 a year.
In addition, you get lousy coverage for your hard-earned dollars. For example, a collision damage waiver often will not pay if the car is driven by an unauthorized driver, or if you’re intoxicated at the time of the crash.
A workaround: If you have full-coverage insurance on your personal car, you’re probably covered when you rent. But check with your insurer to be sure. Some credit cards also offer coverage, although they sometimes do not cover pickups and vans.
Even if you have insurance on your car, you can still be on the hook for “loss of use” claims by the rental car company. Such claims arise when you have an accident that takes the car out of service for the rental car company.
5. Credit card rates
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While technically not a fee, the interest rates charged by many credit cards are outrageous. Big banks borrow from the Federal Reserve at close to zero percent, then lend money to credit card users at 15 percent. Nice work, if you can get it.
The obvious solution here is to avoid interest by avoiding a balance — pay your charges in full each month. But if you’re going to pay interest, shop for a card with a lower rate.
6. Foreign transaction fees
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These fees are charged on credit card purchases processed outside the United States — for example, when you use your card in Europe, or to buy something from a non-U.S. company. Banks that charge them typically collect 3 percent of every transaction.
If there’s any chance you’ll be making purchases outside the United States, use a card that doesn’t charge this fee. There are plenty to choose from.
7. Overdraft fees
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If you overdraw an account and the bank uses its money to cover your negative balance, it deserves to be compensated. But how much? Overdraft fees often cost in the neighborhood of $30 to $35 nationwide. Charging $34 for a one-week loan on the average overdraft of $36 equates to an annual rate of 5,000 percent.
To prevent incurring such fees, link your savings account to your checking account for overdraft protection. This might result in a transfer fee, but it will be lower than an overdraft fee.