Nickeled and Dimed to Death

Last week our son and his wife came to spend a week with us, and a good time was had by all. Said son is the U.S. manager for a small, family-owned, boutique British retail firm, which means he’s financially comfortable, but not extravagantly paid. They flew coach, and his observations on the air carrier were succinct – “They try to nickel and dime you to death.”

For example, although they’d booked their reservations together, when they got to the airport they were told they couldn’t sit together unless they paid another $75. Since the airline going to Utah isn’t the one he flies on business, the baggage fees were $25 per bag. I lost track of the various other fees involved.

His experience is hardly unique. Everywhere I look, there are fees tacked on. Get a new cellphone, even with the same carrier and with the same number, and the odds are you’ll be charged an activation fee – even though said “activation” takes a few minutes at most. I can see such a fee for a new customer… but for an existing one?

Can you even get a new car for the advertised base price? And would you want to drive it? How many people stay with “basic” cable or satellite television services?

Higher education is notorious for such fees. Books, lab fees, activity fees, accompanist fees, parking fees, etc. And I’m sure everyone can cite other examples.

Part of the reason for all those fees is because almost everyone shops for everything on price… and retailers and others use low prices to lure people in, and then tack on the fees, because the initial low prices often don’t even cover costs.

My wife the professor is always amazed at how often university students don’t look at the bottom line when choosing a college or university. A higher-cost more selective university will offer a student what appears to be a significant scholarship, perhaps double what a less prestigious college might offer, but so often the students only compare the scholarship offer and not the bottom-line cost. If tuition is $30,000 a year at university A, and a student is offered a $15,000 a year scholarship, the tuition cost is $15,000. University B, with similar offerings but less prestige, offers a $10,000 scholarship against tuition of $20,000… and the student or family often pick the higher scholarship, even though they’ll end paying [or owing] $20,000 more after four years. Of course, since universities are identical, other considerations have to be weighed, but so many students – and their parents – don’t even think about that.

But… everywhere I look I see this pattern… and how many people fall for it.

9 thoughts on “Nickeled and Dimed to Death”

  1. Hanneke says:

    This uncertainty about the final cost is something I was surprised to encounter everywhere, when I came to the USA for a holiday.
    In stores and supermarkets, the stated price is not what things cost at the till; VAT added at the end. In cafés and restaurants, the price if the meal on the menu is not what you pay; you have to add a (20%!) tip for the waitstaff, who have to live on those tips instead of getting a decent wage. And as you say, airlines are awful at this.
    Not to speak of any medical costs…

    This all makes trying to stay within a budget quite hard if you’re not that good at doing mental arithmetic all the time, and keeping multiple numbers in mind all the while.
    Unless you overshoot on the other direction, and deliberately spend a lot less than you might want to, to be sure the final total will be below the budget line.

    I’ve wondered why the US does this, so consistently making it hard on consumers. Is it to try to force people to pay out more than they were aiming to? Doesn’t that backfire if people overcompensate for that?
    Or is it to “game the market”, making honest comparisons between competing companies near impossible? I thought a totally free market competition was what made capitalism such a great system, according to the US?

    I’m glad that in the EU the prices shown are what one pays, tips are truly voluntary extra’s, and the EU is setting rules for airlines and vacation bookings to be comparable, with all additional costs added in, before booking. At least you know what you’re paying for what you’re getting, before choosing to get it.
    But it does require some such regulations to be put on the market, to keep it fair and competitive.

    1. Tom says:

      What you have observed in the US is what we have to pay as the price for choice and freedom.

      If the cost was just ‘money’ we could manage that.

      Unfortunately, over the last 20 plus years, we have chosen to increase the price of and cut back on the quantity of – some of our “Freedoms”.

      1. Hanneke says:

        Honestly, I sometimes wonder at the US definition of freedom and choice.
        It sometimes seems to me that individual people’s freedoms have become quite subordinate to freedom from regulations and oversight for companies and people with money and power, who get ever more freedom to exploit people.

        The freedom of consumers to make informed choices is constrained by the freedom of companies to hide the true costs of their products, and exactly what is and isn’t included in the product.

        This also skews the free market towards those companies that are more dishonest, and punishes honest companies. Not a tendency to encourage, if you really want a flourishing marketplace of choices.

        Looking at the choices in European shops, study options, airlines etcetera, I don’t think that limiting powerful companies from misleading and exploiting consumers has really limited consumers’ choices in any negative way. Some bad options may not be available, like medical insurance that doesn’t really insure one for anything one might need, but there are plenty of viable insurance options left to choose from, in those countries that don’t use the single-payer model. Ensuring an honest marketplace, where the big firms can’t just squash all their competition, means that all the good options will be offered, by new startup companies if the established big companies don’t.

        1. Tom says:

          Sorry that my cryptic remark was misleading. I was referring to the supposition that increased choice is commensurate with increased “freedom”. Similar to our fascination with “diversity” and “equality”, “freedom” is as slippery as our politicians and legal system can make it.

          ‘The freedom of consumers to make informed choices is constrained by the freedom of companies to hide the true costs of their products, and exactly what is and isn’t included in the product.’

          Yes indeed and that requires (drum roll please) BALANCE of freedoms! Because that way we get the situation where the seller tells the buyer exactly what they are getting for the stated price. However I do not think I am really interested in what it costs someone to produce a product; I am more interested in having a clear description of what I am getting for the stated price. But, I am of the so-called “silent” generation most of which do not buy on credit because they get nervous if they do not have the funds to do as they wish. That is why we get irate with nickel and diming (aka sucker mining); and agree with ‘… limiting powerful companies from misleading and exploiting consumers has (not) really limited consumers’ choices in any negative way.’.

        2. R. Hamilton says:

          Freedom means that those who are effective have access to more material benefits than those who aren’t effective.

          Ideally effective means productive or useful, but it can also mean as misleading, deceptive, and exploitive as the law allows. And ineffective also includes every failure to keep “caveat emptor” firmly in mind, that nobody wanting to stay in business offers you a deal that’s improbably good or that fails to benefit them too. You’re the only one that can be counted on to look out for your interests. If a politician or government says they will, they’re really looking out for their OWN interests, whether re-election, more power for them, expanding bureaucratic empire, whatever. They may incidentally have to deliver on some fraction of what they promise, but the costs in both liberty and property either undisclosed up front or unanticipated, are usually massive. Even if they start out idealistic, most idealism and ideology is unrealistic, or Utopia would already be here; and after 8 years tops, they’re compromised enough by either legitimate compromise gone too far (exchange of pork) or by the sheer number of those willing to offer corrupt exchange for influence. ALL power over anyone except oneself, even if first obtained for good purpose, corrupts, because the hunger for power is unsatisfiable.

          Every freedom can be abused. That’s one of the many costs of freedom, and as far as I’m concerned, the freedom is almost always worth the cost, even if the cost includes much theoretically avoidable death and misery – and even if the freedom includes activities or opportunities that I don’t wish to pursue myself.

          Do I advocate 100% laissez-faire? Almost, not quite. Some regulation is necessary: bandwidth and airspace are finite, and air and water flow across boundaries; and there may be situations where egregious abuse is so commonplace that it’s more efficient to stop it than to allow it. But minimum, always minimum, and never trying to solve grand problems that require vast transformation and expansion of control (or social engineering Goodthink, either), pandered more palatably as “hope and change” or similar empty lies.

  2. Grey says:

    My most hated variant of this is how so much is being pushed into a subscription model. It’s not just for newspapers and magazines anymore, now it’s yoga classes, ski resorts and software. They make the one-time cost so high that the only thing that seems to make financial sense is to sign up, or there is no single-purchase option at all (I am looking at you, Adobe Photoshop), with the result that you spend far more than you would if you had a real choice.

    1. Tim says:

      Here in the UK, charities are very keen on this model. Attempting to give a one-off donation at a fair brought the response that the only option was a monthly subscription with a set starting level.

      It seemed wrong somehow.

    2. R. Hamilton says:

      Insofar as software is maintained (not only bug fixes but updates needed to work on newer OS versions or hardware, new features, etc), it’s an illusion to suppose that one-time cost represents the cost of providing it. Programmers also need food and housing. Classes also fit a model with a longer commitment than one session. But there are subscriptions where the purpose seems to be to get a continuous cash stream for very little ongoing value provided; and whether that’s endemic to a category, or just indicates minimal effort at the continuing work, it’s on the consumer to decide what’s of value to them and what isn’t.

      I have a number of other issues with Adobe, not just their prices or subscription model, but that they’re notorious for vulnerabilities, which are symptomatic of a larger range of bugs that might not be discovered until some unanticipated usage or input is encountered; and IMO, if chronic, of a defective development process. I don’t like sloppy workmanship; do it right or do something else.

      Depending on your needs and willingness to learn to use something very different, there’s lots of alternatives, although in collaborative situations, you may be stuck with using de facto (spelling checker tried to make that “defective”, nice irony) standards like Photoshop.

      1. Tim says:

        It sounds like the Adobe development program uses Agile:)

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