Fees, surcharges, and taxes appear on all matter of bills. From cell phones to electricity, from garbage collection to credit cards, bills come laden with so many “extra“ costs that it can be hard to discern what the individual is actually paying for. The sheer number and obscurity of these fees and surcharges can leave the most brilliant customer shaking his or her head. Adding to the mess is the fact that frequently terms are used interchangeably. It becomes hard to tell a fee from a surcharge from a tax.
When an individual signs up for any good or service, the cost of the item or service provided is usually only the beginning of charges listed on the actual bill. Frequently accompanying the initial cost are a host of other charges. Some bills are so complex (for example, credit cards) that they come with separate brochures to explain all the possible fees and surcharges that may be levied, depending on the circumstances.
Put simply, a “base” fee is the standard charge for a good or service. When a cable company advertises a rate of $29.95 per month, this is the fee charged for the service received. All of the other fees and surcharges are additional components to this base fee. How many consumers have been shocked to discover that what they considered a bargain price for a service is anything but when they receive the first bill and see all the attendant fees and surcharges?
Things get tricky when companies use “fees” to pay for conditions that that government stipulates. For example, with cell phone service providers, those costs arising from government-mandated programs can be passed along to consumers as fees. (One example is Wireless Number Portability, a program that allows a consumer to transfer an old number to a new carrier.) In these cases, fees are very much akin to taxes (see below).
Fees are typically the base components of a good or service while surcharges come from extraordinary circumstances. Fees are most often thought of as linked to usage. For example, using an ATM at the issuing bank will not incur a fee, while using one out-of-network will.
A surcharge is an extra fee added to the base line fee for a special service or condition. More than one surcharge can be added for each additional factor. For example, airline fees typically include a fuel surcharge, should the price of oil rise above a determined price point. The surcharge will only be applied if the stated condition is met. It’s not “normal” to charge separately for fuel for a flight, but when oil prices skyrocketed, rather than raising the normal ticket price, airlines decided that it was better marketing to add on a fuel surcharge instead. This frequently makes the price look more competitive, as most consumers will not bother to factor the surcharge into the base price when comparison shopping.
In addition to fees and surcharges, nearly always there are additional taxes added to a consumer’s bill. These can be federal, state, or local. They can be general taxes that flow into the overall governmental coffers, or they can be specialized taxes, such as the gas tax, which are allocated only to projects involving road improvement and maintenance.
Differences and Similarities
Are fees, surcharges, and taxes really all that different, or is it a simple matter of semantics? In large part, fees and surcharges have more in common than they do unique differences. Taxes are more distinctive in that they are charges originating from governmental bodies, but as shown with fees, government-mandated programs can incur hidden taxes, which then appear on bills as fees.
What consumers should pay close attention to are those charges on bills that can be avoided (fees that are optional, based on use) and whether any fees or surcharges are assessed for services that the consumer did not request or use.