It’s easy to think this is a travel site, considering all the airline and loyalty program complaints I handle every day. But it isn’t and never was designed to be one.
It’s a consumer advocacy site.
I say that because Jason Pierce’s case has little to do with travel but everything to do with you and me. Given the proximity to Black Friday and the reflexive shopping orgy we are about to witness in the United States, it is worth considering.
Pierce, a finance professor at a college in Chicago, has a problem with a small fee: the one he was recently charged in order to cash a check.
In the past, Pierce could take a check to any branch of the bank on which it was drawn and cash it with a driver’s license with no additional charge. But that’s no longer an option, as he recently discovered.
“It appears that many banks now want to charge a fee for this service if the payee does not have an account with them,” he says. The fees range from $5 to $10 plus a percentage of the value of the check. Ouch!
When he asked the bank to waive the fee as a one-time courtesy it refused, saying it was “not possible.”
“They had no explanation for this relatively new practice, apart from, ‘All the banks are doing it,'” he recalls. “Of course, the ‘Well, if all the banks jumped off a bridge, would you do that too?’ response didn’t get me anywhere.”
Pierce put on his professor hat to analyze the problem. Remember, he teaches future bank managers how to run their businesses. So this is somewhat of an academic exercise.
“After thinking about it, it occurred to me that this service fee is merely a way of exploiting individuals who have no other options for cashing checks, particularly foreigners and illegal immigrants,” he says. “I do not find this a particularly nice way to do business, but am not sure if there is cause to make a case about it. I would be very interested to know what you think of this practice.”
Well, I’m glad you asked.
The check cashing fee, like many bank and credit card fees, is just a “junk” fee. By “junk” fee, I mean a surcharge that the company normally would absorb the expense as the cost of doing business. But it doesn’t, because it can make more by using “a la carte” pricing, no matter how questionable the justification. (Kinda makes you wonder about those “free” checking accounts they offer, doesn’t it?)
Interestingly, banks collect about $31 billion in overdraft fees every year, according to a recent survey. Fees are such a huge source of revenue that if you remove them, many industries might even collapse. This fee-based economy is not necessarily evil, except when the extras aren’t disclosed or when you’re given the impression that you’re receiving a full-featured product, but don’t.
A check is a good example. They are nothing more documents that order a bank to pay money. I had a look at my checkbook, and they don’t disclose any fees or even that there may be a fee for cashing a check at my bank or any other bank. I’m left to assume, as Pierce and many other customers do, that it won’t cost anything to do so.
A financial institution might argue that Pierce has the “option” of cashing the check at his own bank and saving the $5 to $10 fee. It would also say that the fee is there for his own good. Without it, he would be subsidizing all those other people who are trying to cash checks at other banks. The cost of those transactions would be spread among all customers in the form of higher interest rates or fees for other items.
I don’t think you want to go there. As customers, it’s not our responsibility to worry about the profitability of a company. Indeed, we shouldn’t give their earnings a second thought unless we’re shareholders.
The bank — any business — has an obligation to offer a quality product at a fair price. That’s all you need to concern yourself with.
If you accept the responsibility for the profitability of any company, you’re a fool. They certainly aren’t going to reciprocate. In good times and bad, it sees you as a walking dollar sign. It won’t waive its fees when you’re unemployed or deeply in debt.
And that is why these junk fees are so pernicious. They’re accompanied with a seductive propaganda that these surcharges are in fact good for you because they give you “choices.” And they also keep the company strong and profitable, as if it’s our duty to ensure their profitability.
It is time to fight junk fees wherever they are — in banking, retail, and travel. These add-ons, and their wrongheaded justification, only serve corporate America’s interest. They make the rest of us look like suckers.