TEXT OF COMMENTARY
Chris Farrell: I am not a fan of prepaid credit cards. Number one reason — all those hidden fees.
Tess Vigeland: Our economics editor Chris Farrell.
Farrell: ‘Course, when it comes to fees, the credit card companies are hardly alone. Lest you think we’re talking small amounts of money, Kiplinger’s personal finance magazine estimates we could save more than $5,000 a year if we only take the time to avoid fees.
But I think the loss is more than that, possibly much more. This is rip-off capitalism at work.
Now, some of the fees are like a slap in the face. I used to get annoyed at a $1 charge to use an out-of-network ATM. Now it’s more like $3 to $5.
All too many of the fees are sneaky. Look at all the charges airlines impose on such things as checked baggage, a seat with extra legroom and early boarding. And have you ever looked at a car rental contract at an airport? Did you pay attention to the “concession recovery” fee? It typically runs about 11 to 13 percent of your rental. It’s how the rental company pays the charge airports impose to do business there.
Mutual fund companies — they’ve devised all kinds of charges. The worst may be the 12b-1 fee that pays for marketing expenses. There are also the various loads or fees many mutual fund companies charge to invest with a fund.
I could go on and on and on. But you get the point: we’re being nickeled-and-dimed by fees.
But there’s only so much you and I can do. We have other things to do with our time, like work and family. That’s why these fees work — companies know we’re too busy to pay attention to small charges. And that’s why government regulators need to step up the fight against rip-off capitalism.
For instance, thanks to legislation, 401(k) plans will have to make their fees and charges readily apparent to participants starting next July. Up until now, the information has been hard to find. There was minimal disclosure. Yet fees can make a huge difference to returns.
The federal government could take a pro-consumer stance by forcing the airlines to make the cost of their fees easily understood. It would make for better comparison-shopping online, a boon to flyers. The new Consumer Financial Protection Bureau must make fee disclosure a top priority.
Meanwhile, there’s a note that should be taped on to the computer of the modern American consumer. “It’s the fees, stupid.”
Vigeland: Chris Farrell is the Marketplace economics editor. Express your fee outrage in the comments.
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