Drip Pricing: What It Is, and 5 Ways to Fight It
Few things are as annoying as a business that advertises one price but increases it at the purchase point by adding on fees. While we might simply call the practice a rip-off, the Federal Trade Commission has an official term for it: “drip pricing.” And apparently, it’s become so prevalent that the FTC even held a one-day conference in May to discuss it.
Where drip pricing is worst
One flagrant example of drip pricing? Hotel stays. Hotels advertise low prices and then hit travelers with “resort fees” and other mandatory surcharges to significantly increase their take. In 7 Tips to Beat Hotel Fees, Money Talks News founder Stacy Johnson lists a bunch, saying, “The list is as long as it is sneaky.”
Last month, USA Today reported that this year hotels expect to collect “a record $1.95 billion in add-on fees from guests.” Helping them do that, in my opinion, are travel sites like Hotwire and Priceline, which often disclose that hotels may charge some fees – but you don’t find out for sure until checkout.
Other industries well-known for drip pricing include airlines, car dealers, car rental agencies, and telecommunications companies. Often, mandatory fees are described in a way that makes it appear as if they’re government-mandated when they’re not.
Why drip pricing is bad
Obviously, these fees make it difficult or even impossible to determine actual prices, and once one merchant engages in drip pricing, there’s an incentive for all of its competitors to do the same. But drip pricing can hurt entire communities: With hotels, for example, USA Today says, “Local taxing authorities miss out on potential tax revenue because they collect taxes only on the room rate vs. overall rate.”
At the same time, any business that’s unfair to its customers is bound to lose some of them, and the actions of a few companies can reflect poorly on an entire industry.
What you can do about drip pricing
Here’s how you can stop the fee drip…
Be an informed consumer. At the FTC meeting mentioned above, Amelia Fletcher, chief economist of the UK Office of Fair Trading, pointed out “Sophisticated consumers spot [companies] using hidden charges, naive consumers don’t.” Be the sophisticated consumer by always reading the fine print or asking before you commit.
Boycott drip pricing. Vote with your feet and avoid companies playing this game – and tell them why you’re taking your business elsewhere.
Contest the additional fees. If you’re being charged fees you weren’t properly informed of, ask a manager to remove them. Your chances of success are best if you have something in writing – like a reservation confirmation – that doesn’t include the fees.
Use the power of your credit card. When you offer your credit card as a form of payment, you should only be charged the price you agreed to. If you have a reservation in writing that doesn’t include fees, request a chargeback if you’re hit with a different amount.
Report them to the FTC. If you have a problem with a specific merchant, you can file an official complaint with the FTC. In addition, you may wish to inform merchants in advance that you’ll be filing a complaint – giving them the opportunity to reconsider.
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