What Are Drip Fees and Why You Should Care About Them

Hidden tricky fees seem to be popping up more and lurking everywhere, whether you've noticed or not. There are many names for these fees. But they all fall under the umbrella of “drip fees.” So what are these drip fees, and why should they matter to you?

Higher Prices

Like everything else in life, once you experience inflation and rising prices—you read about it, hear about it, and pay for it—it becomes more natural to you and almost what you expect to happen until it stops.

But, unfortunately, you don't know when that will happen, so you continue to pay higher prices because, in most cases, you have little choice in the matter.

So when you head out to buy your favorite meal at an excellent restaurant for $24.99 or shop online for those $50.00 bargain concert tickets, you expect to pay those prices for them, but you may not. Do you carefully check the final cost of the bill? Are you actually paying $50.00 for that $50.00 concert ticket?

Drip Pricing

This tactic is called ‘drip pricing,' and it's not new – it has reared its ugly head in the past. Think of it like a leaky kitchen sink and how annoying it is to hear that constant dripping sound. This time, however, the drip is on your wallet.

Drip pricing is a strategy used in industries that are very much price driven. It consists of revealing the total price gradually to draw people into the buying process and make their options seem cheaper than the competition. It's a strategy that is often found online, though not exclusively. You may even experience it when ordering a pizza from your neighborhood shop.

Drip, Drip, Drip

Drip pricing is becoming more prevalent among businesses as they grapple with higher overhead costs for goods and wages. For example, restaurants add drip fees, often called “kitchen appreciation” fees. Airlines and companies like Uber also began implementing fuel surcharge fees as oil prices skyrocketed. The names of these fees are endless and imaginative.

You may be sympathetic to businesses as you know how inflation has impacted your finances and understand they are also suffering.

However, even if you feel sorry for United Airlines or Ticketmaster and its parent company Live Nation Entertainment, Inc., you still want them to be upfront and honest when doing business with you.

Inflated Prices

Businesses can inflate prices to whatever they feel they can get away with in a short-supply market. Unfortunately, drip pricing is part of that.

Yes, inflation has made the costs of raw materials more expensive. Still, businesses are worried that raising retail prices will upset consumers. So, adding drip fees is a way to seemingly avoid price gouging.

Misleading Practice

In 2016, Ticketmaster and its parent company Live Nation Entertainment, Inc., allegedly used the deceptive practice of “drip pricing” that led to customers sometimes paying more than 65% above the advertised costs of tickets!

The findings were that Ticketmaster's advertised prices deceived consumers by adding more mandatory costs, like service fees, facility charges, or order processing fees later in the purchasing process. This so-called drip pricing allegedly caused consumers to pay much higher prices than advertised.

These mandatory fees inflated the advertised price by more than 20% and, in some cases, by more than 65%.

Not revealing the actual cost of tickets is misleading after fans use the original price to decide which seats to buy. Furthermore, consumers often don't want to lose their tickets once the true cost is revealed, increasing pressure on them to finish their purchase regardless of the extra drip fees.

While concert ticket prices are one thing, the same kinds of investigations have also been done against car rental companies. It is particularly painful when using an online service to make purchases because it usually involves fine print and credit cards that don't seem to make contact with the brain like in an in-person transaction.

Why Do We Accept This Practice?

Why do people fall for drip pricing? It's pretty simple. When you first look to make a purchase, you see the “lowest price or rate” on what you want, which psychologists call the “anchor price.” Any add-on or “drip pricing” adjustments are just that and are seen in relation to that initial anchor price.

Most people react by thinking it's only a little bit more than what they've already internally committed to paying. But it is not. If you travel, look for something called a “resort fee.” That's a fee on everything you'd expect to be included in the hotel's rate, but now it costs you extra!

Travelers drawn in with low anchor prices tend to develop an attachment to the fare or rate and go along with price increments without paying much attention to them.

If you stay at most hotels these days, you'll likely find multiple drip fees on your final bill. This is because hotel reservations and vacation rentals are growing daily, and drip fees substantially increase prices.

Final Thoughts

The first thing to understand, especially nowadays, is that businesses are in business to make money. They are motivated by profits; sometimes, they mislead and take advantage of you. Dripping prices is one way they do that.

Whether a convenience fee, cleaning fee, surcharge, or any other name, if it's not presented upfront to you when you want to buy something, it's a drip fee and hurts you.

Since it's being created by “experts” and working quite well right now, it's your job to look for these fees and decide if the purchase is worth the final cost.

This article was produced and syndicated by Wealth of Geeks.