These Are the Worst Consumer Fees

Consumers hate annoying service fees – so why not get rid of them?

U.S. financial consumers don’t like nasty service fees – think bank checking fees, annual credit card fees, or Airbnb housekeeping fees, among numerous other fees and charges.

You can’t blame them. Having to pay extra for a service that may not be held in the highest regard is no fun. Worse, paying for fees can really pop a dent in your wallet if you leave them alone.

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While Americans have a good idea of what money fees they dislike the most, what are the fees that actually are the worst of the worst in the eyes of financial experts?

The Worst Consumer Fees

These service fees are the “worst” on that loaded list.

Overpaying for credit. When it comes to consumer fees, there are the major leagues and the minor leagues.

Make no mistake, overpaying on debt interest, especially with big ticket items like credit cards, mortgages, and autos may be the worst consumer fee of all.

“Don’t pay with anything on a credit card or buy now pay later (BNPL) loans unless absolutely necessary, especially if you’re not paying off balances in full each month,” said Brightside head of financial solutions Sophi Raseman. “If spending control is your issue, don’t open any new cards and freeze the old ones in a block of ice.”

Also, don’t let any lender talk you into a longer loan timetable. 

“It may seem like that will ease the burden of having a higher monthly payment,” Raseman said. “This is one of the ways consumers get enticed into forking over the highest amount of interest fees possible to their lenders and is particularly rampant in auto lending.”

Late fees because you got busy with life. An industry person once told Raseman a term credit card insiders used for financially secure people who can afford to pay off their credit cards, but pay interest charges and late fees because they forget to pay on time.

“They call those people “sloppy revolvers,” Raseman noted. “Don’t be played for a sucker by credit card companies or other billers. If you have the room in your cash flow to do so without risking overdraft, insufficient funds, or other payment failure fees, set up automatic recurring bill pay for your important bills.”

Long-term financial investing fees. Seeing your 401k sink in 2022 was bad enough without worrying about retirement planning fees.

“Fees on 401k plans are usually one of the highest because, typically, there are money manager fees, along with trading charges and administration fees,” said Statewide Financial Group president Stuart Boxenbaum. “When you’re contributing to a 401k, always know what you’re paying, but also understand where your money is invested.”

Variable annuity fees are as bad, if not worse than 401k plan fees.

“Not only is the cost higher with variable annuities than most market investments, your money is also tied up longer because it still is an annuity,” Boxenbaum said. “Variable annuities also have significant market risk even as you pay more than you need to in fees.”

Fixed-indexed annuities are generally much more cost-effective than variable annuities, especially when you can shop them out and only pay for what you need.

“Typical fees on a fixed indexed annuity can be in the 1 to 1.5% range annually, which is considerably less, on average, compared to a 401(k) or variable annuity,” Boxenbaum added.

Hedge fund fees. There’s no doubt that hedge fund fees are outrageous, even as the country club set doesn’t seem to care.

“With hedge funds, The typical “2 and 20” fee structure means you pay 2% for the fund managers to sit on your money and 20% of the profits if they actually do their jobs,” said MD Financial Skills founder and former commercial banking specialist Michael Diamond. “Invest in an index fund instead, pay next to nothing, keep all your profits, and turn the country clubs into public parks.”

Household consumer service fees. Just having a bank account and owning a mobile phone, among other commodities, can add hundreds of dollars to the household budget. 

These consumer service fees are among the worst, said Billsmart chief executive officer Mark Chen.

--- Bank overdraft fees. Log into your account or call your bank to turn off overdraft fee protection. “Now if you charge more to your card than you have in your account, the charge will bounce instead of going through," Chen said.

--- Phone company administrative fees. You can't remove these fees but you can lower what you're paying on your phone bill.

“Negotiate or have someone negotiate a lower rate to save $15-$50 a month on your bill,” Chen advised.

--- Rideshare surge pricing fees. Check all ride-sharing apps in your city and consider using a taxi or public transportation

--- ATM fees. Withdraw money from in-network ATMs or make bigger but fewer withdrawals.

“You can also sign up for cards like the Charles Schwab Debit card that completely refunds your ATM fees,” Chen said.

--- Late fees. You can get most late fees refunded.

“Most of the time you just need to talk to your bank or phone or cable company and they'll refund the first few late fees as a courtesy to you as a customer,” Chen added.