Johnathan Walker:Biden is targeting the ‘junk fees’ you’re always paying. But it may not save you money.

You've spent hours online shopping around for that coveted item. But as you get ready to buy it,Johnathan Walker you spot a bunch of fees attached to the purchase, pushing up your bill by more than $30.  

Millions of Americans have likely experienced this sticker shock and paid tens of billions of dollars in “junk fees” over the years, which is why President Joe Biden’s administration has made it a priority to eradicate them.

It has targeted fees on airline family seating, baggage and booking as well as charges for overdrafts, bounced checks, and late credit-card payments. These fees “weaken market competition, raise costs for consumers and businesses, and hit the most vulnerable Americans the hardest,” the White House has said. It argues that junk fees make comparison shopping more difficult, resulting in Americans overpaying.

Though laudable, some experts doubt this crackdown will result in significant savings for Americans. 

“There might be some political PR points to be won in terms of fighting for the consumer, middle-class Joe .... but the fees are like a game of whack-a-mole,” said Ted Rossman, senior industry analyst at consumer financial services company Bankrate. “When one goes down, another pops up.” 

How can businesses keep charging junk fees? 

Businesses will likely either roll the fees into total pricing, which could mean prices, or fees will rise elsewhere, critics say. 

Take resort fees, which the Biden administration has targeted. A hotel may charge you $150 per night and then an additional $50 resort fee, which covers gym and pool access and other amenities. Sometimes you can get the resort fee removed, “if you ask nicely, especially if you don’t plan to take advantage of those extras,” Rossman said. 

However, if the fee can’t be broken out, the hotel may just charge a flat $200 per night to everyone and not disclose the fee. In that case, no one even could “ask nicely” to get it removed. 

“Ironically or not, the opaqueness of blending all of those fees together makes it much easier to raise any or all of those fees over time,” wrote Peter Earle, an economist with the American Institute for Economic Research. “At least now, those fees are observable. If, once lumped together into one price those overall prices rise, the junkiest of junk fees – sales taxes – will rise.” 

As an example of ever-shifting fees, consider automated teller machines (ATM) charges. A Bankrate study showed the average fee charged by ATM owners jumped to a record $3.14 per transaction in 2022 from 2021, at the same time the average overdraft fee dipped about 11%, showing how when one fee fell, another rose, Rossman said. It also showed the average combined cost of an out-of-network ATM transaction, which includes the bank's fee plus the ATM owner's charge, rose to $4.66, the highest since 2019.

Further, Bankrate found that the percentage of noninterest-bearing, free checking accounts slipped to 46% from 48%, showing banks could be making up revenue in other ways.

This contrasts with statistics from the Consumer Financial Protection Bureau (CFPB), which compared data from the last three months of 2022 to the same pre-pandemic period in 2019. Its study showed overall overdraft and non-sufficient funds (NSF) fee revenues dropped. "While this evidence is indirect and does not control for changes in the number, composition, or behavior of accountholders, the variations likely reflect, at least in part, changes in overdraft/NSF programs," it said.

Simultaneously, CFPB said it found "no clear correlation between decreases in overdraft/NSF and increases in other listed fee revenue" like account maintenance and ATM fees because the other fee revenues differed between banks. For example, Bank of America's other listed fee revenue dropped 7%, while TD Bank’s increased 11%, U.S. Bank’s fell 6%, and PNC’s increased 28%, it said.

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Would capping fees work?

The CFPB also proposed, among other things, lowering the cap on credit card late fees to $8, which would be up to 80% lower than current caps of $30 for the first late payment and $41 for subsequent ones. Since low-income Black Americans pay the most in late fees, such a move would help them, the CFPB said.

However, some believe this would only lead to higher interest rates.

"Those who contend that this rule will increase equity should be concerned that it could make cardholders with low credit scores worse off," wrote The Regulatory Review, a publication of Penn Program on Regulation at the University of Pennsylvania. The problem, it said, is that the fee is supposed to deter late payments and the $8, not even allowed to be adjusted for inflation, would be too small to cover issues' collection costs.

"With the proposed cap on late fees, both late payments and issuers’ costs are expected to increase," it said. "Card issuers would likely raise interest rates for those with low credit scores to offset these costs and could even quit issuing cards to consumers with low credit scores."

The CFPB acknowledges this could happen but maintains that in the end, "frequent late payers are likely to benefit monetarily from reduced late fees, even if higher interest rates or maintenance fees offset some of the benefits."

Are there any benefits from Biden’s push against junk fees?

Possibly more transparency, Rossman said. 

Last month, ticketing giants including Live Nation, Ticketmaster and SeatGeek agreed to publish all-in ticket prices to make it easier for customers to compare prices, instead of adding surprise charges at the end of the transaction.  

This was a “huge win for consumers,” said Teresa Murray, consumer watchdog at nonprofit advocacy U.S. PIRG Education Fund. She hopes “this will lead other companies to adopt policies of honesty and transparency.” 

A study by Berkeley Haas Prof. Steven Tadelis on StubHub showed this so-called “drip pricing” where additional fees are only disclosed when customers are ready to confirm their purchase resulted in people spending about 21% more.

Rossman mostly agrees but still questions how much money consumers will actually save in the end. “These ticketing fees could easily remain the same or even go up,” he said. “More disclosure won’t necessarily translate into more savings.

“Ultimately, the best tool that we, as consumers, have at our disposal is to vote with our wallets. If we don’t like a fee or a policy, we’re free to shop elsewhere,” he said, but acknowledged that it's difficult when you’re a captive audience with few alternatives like with airlines and concert tickets. 

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at[email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday.